Diesel margins could increase from Russia’s diesel ban

Refinery margins in Asia have fallen in recent weeks as China has boosted fuel exports amid high export quotas it has allocated to refiners in recent months. Diesel refining margins are still at historically high levels and could rise again when the EU ban on seaborne fuel imports from Russia takes effect on February 5. For example, margins on diesel, the main component of diesel, from Dubai’s crude processing at a Singapore refinery, fell 34 percent from a fourth-quarter peak of $46.83 a barrel in mid-October to $30.90 earlier this week. Estimates By Clyde Russell, Reuters Asia commodity and energy columnist.

Going forward, margins for fuel in Asia will reflect two opposing trends: a downward trend related to China’s potentially higher fuel exports, and an upward trend in Europe potentially competing for diesel and other Asian products in the absence of Russian fuel imports. slow

Chinese Fuel exports increased In December, gasoline sales abroad matched October 2020’s record, following a massive export quota that authorities gave refiners at the end of 2022.

Gasoline exports rose to 1.91 million tonnes in December, a record high set in October 2020, while diesel exports rose to the highest level since March 2021 at 2.79 million tonnes, according to official Chinese data.

High export levels in December were the result The largest category of fuel export quota Issued for 2022 by the authorities. At the end of September, China allocated 15 million tons of new fuel export quota to its main refineries. Exports also remained high due to weak domestic demand as China began easing its “zero corona” policy in December, which led to a rise in pollution.

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However, China’s fuel exports in January could be much lower than in December as refiners sought to stockpile gasoline and diesel for domestic demand around the Lunar New Year on Jan. 22, meeting expectations of higher demand at home after Covid restrictions. Analysts say it has increased.

Nevertheless, the reopening of China and Higher fuel export quota Allocations in the first batch from 2023 on Chinese demand and fuel exports look to increase in the coming months.

If Europe – which is trying to replace Russian fuel after February 5 – turns to more supply from Asian refiners, refining margins in Asia will widen.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said: “When the EU sanctions on Russian marine fuel exports begin, we will probably see the price of gasoline and especially diesel continue to increase with supply tightening.” Analysis Last week

“Russia may have trouble offloading its diesel to other buyers because key customers in Asia are more interested in feeding their refineries with Russian crude, which can then be converted into fuel products that can be priced at It is commonly sold in the global market.

He noted that, despite the potential for more supply from the United States and the Middle East, a shortage of diesel seems likely.

“There seems to be a potential deficit, especially given the prospect of a strong recovery in China leading to reduced export quotas,” Hansen said.

The expected rebound in jet fuel demand, in turn, is likely to pressure diesel yields and “provide another layer of support for distiller cracks on both sides of the Atlantic,” according to the strategist.

There is a lot of uncertainty surrounding Russia’s fuel supply in the coming months, the key being whether Russia will be able to put barrels moved from Europe elsewhere, and whether the planned price cap on Russian fuels will work as planned. The European Union was considering setting a cap of $100 a barrel on Russian diesel to limit the potential impact on global supply after an EU ban on Russian refined products took effect on February 5. It’s a few days before the EU ban begins Still in conflict More than the price ceiling of Russian diesel and other products.

By Tsvetana Paraskova for Oilprice.com

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