Asian refineries are grappling with what’s expected to be a brief period of weak profits as a demand-sapping Covid-19 comeback across the region coincides with a likely surge in oil-product exports from Iran.
The virus resurgence in India and other nations apart from China is reducing consumption of products such as gasoline and jet fuel, squeezing the profit margins of refiners. The market is also bracing for the possibility of a boost to Iranian fuel oil supplies into Asia should a nuclear deal be revived.
That’s led to complex refining margins in Singapore, a proxy for Asia, falling from $1.65 a barrel at the end of April to as low as 3 cents in mid-May. While it’s a setback for processors recovering from the pandemic, margins have rebounded slightly and are expected to resume an upward trajectory as soon as the third quarter with accelerating vaccination rates aiding demand.
The average profit from converting crude into gasoline in Asia — the so-called crack spread — fell in May from April, snapping a three-month gain. Across the region, restrictions in place from Malaysia, Vietnam to Japan sapped demand for transportation fuel, with oil consultancy FGE seeing India’s gasoline