Refinery boom cuts margins in region
Asian oil refiners face shrinking margins next year as China triples new processing capacity and Saudi Arabia opens plants.
Profit from processing oil will drop an average 11 per cent next year, according to the median of eight trader, refiner and analyst estimates compiled in a survey.
A plant running Dubai crude in Singapore will make an average of US$4.84 a barrel this year, 16 per cent less than last year, according to KBC Energy Economics. The British-based consultant anticipates a further 4 per cent drop next year.
JX, Japan's largest refiner, cut the profit forecast for its oil-product business to September because of smaller margins. SK Innovation, South Korea's biggest processor, predicts "limited" gains next year as competition intensifies.
China is adding plants even as its economic growth trend slows.
"The wave of expansions coming up in the Middle East and China doesn't bode well for refining margins," said Praveen Kumar, the head of East of Suez Oil at Facts Global Energy. "They don't really care as much about refining margins outside their countries."
Asian benchmark margins would average US$4.63 a barrel next year, compared with US$5.74 last year, said Jit Yang Lim, an analyst at KBC.
Estimates for next year ranged from US$4 to US$7.10 in the survey of traders, refiners and analysts, with seven of the eight predicting declines and one forecasting a 6 per cent gain.
Refinery capacity in China will grow 7.3 per cent to about 660 million tonnes a year next year, China National Petroleum Corp estimates. That is the equivalent of about 13.3 million barrels a day. By contrast, oil demand will increase by about 3.9 percent to 10.6 million barrels a day, the International Energy Agency says.