RPT-Refiners struggle to stay afloat as Asia drowns in gasoline – Reuters

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(Repeats story published last Friday with no changes to text)

* Breaking down the barrel: tmsnrt.rs/21bOZKa

* Singapore light distillate stocks near record

* Refiners see no quick improvements in profit margins

* Falling profits hits refiners’ shares, market caps

By Henning Gloystein

SINGAPORE, May 13 Asia’s refined product markets
are being swamped by a wave of gasoline as a long-lasting crude
oil glut spills into the one fuel market refiners had hoped
would save them, ruining margins and dragging down share prices
across the region.

Singapore’s benchmark gasoline margins – long the bright
spot for Asia’s oil processors amid rock-bottom profits earned
on diesel, jet and shipping fuel – have more than halved since
the beginning of 2016, when they were near at least a seven-year
high for first-quarter values. GL92-SIN-CRK

With gasoline’s slump, overall refining margins in Singapore
have dropped nearly 60 percent since the beginning of the year,
buckling under the weight of the fuel products pumped out of oil
plants as refiners feasted on crude prices that were as low as
three-quarters of their mid-2014 levels. DUB-SIN-REF

Besides dragging down crude refiners’ share prices, this
drop in margins could also undercut global oil prices
that have struggled up from 12-year lows hit early this year,
and refiners say the situation will not improve anytime soon.

“We don’t expect 2016 refining margins to improve. In fact,
the situation could worsen from second-half of 2016 as the peak
maintenance season in Asia will be over,” said KY Lin, spokesman
for Formosa Petrochemical Corp, meaning that more fuel
would hit the market once shutdown refineries restart.

In a sign of just how bloated the market has become,
Singapore’s light distillate stocks, which includes gasoline,
hit nearly 16 million barrels late last month, the highest on
record, according to government figures. The stocks have dropped
back since, but there’s still enough gasoline in the tanks to
fill up almost 50 million average-sized vehicles.

Lin said some of the main contributors to the gasoline glut
have been private Chinese refiners, known as “teapots”, that
have started exporting their surplus petrol, overwhelming

The collapsing margins are a sharp reversal from
expectations of a few months ago. Just in February South Korea’s
SK Innovation, a major Asian refiner, said its
margins would remain strong as demand for gasoline and naphtha
offset weaker markets for other fuels.

Formosa Petrochemical operates a 540,000 barrels per day
(bpd) refinery in Mailiao, Taiwan, the island’s largest and one
of the 10 biggest in Asia. Formosa produces about 3 million
barrels of gasoline a month, over half of which it usually


The impact of tumbling refining profits has been reflected
in the stock markets.

The market capitalization of SK Innovation has fallen by
half a billion dollars in the last three weeks to 14.6 trillion
won ($12.5 billion) as its share prices dropped by 15 percent.

The trend has been similar for Formosa Petrochemical and
others – such as Japan’s major refiners JX Holdings,
TonenGeneral, Cosmo Energy and Idemitsu Kosan
– with shares down between 5-10 percent so far in May.

The slumping processing profits are fallout from a crude
glut that emerged in 2014 as exporters around the world raced to
ramp up output in a fight for Asian market share.

With daily output last year eventually exceeding demand by
as much as 2 million bpd, crude prices fell by around 75
percent between mid-2014 and early 2016.

This was a signal for refiners to ramp up operating rates
across Asia to profit from still strong demand for fuel,
especially from China and India.

“That caused global oversupply and refining margins to
tumble as demand couldn’t (keep) supporting the increasing
supply,” said Kim Woo-kyung, an SK Innovation spokeswoman,
adding that her company now had high volumes of unsold fuel.

($1 = 1,170.5000 won)

(Additional reporting by Li Peng Seng and Florence Tan in
SINGAPORE, Rebecca Jang in SEOUL, and Osamu Tsukimori in TOKYO;
Editing by Tom Hogue)

RPT-Refiners struggle to stay afloat as Asia drowns in gasoline – Reuters}