SINGAPORE (BLOOMBERG) - Oil soaring to near US$100 a barrel is doing little to slow down demand from the biggest buyers as refineries in Asia look to boost processing rates to cash in on a boom in fuel-making profits.
Despite rising crude prices, margins for producing diesel and gasoline have surged to near pre-pandemic levels as inventories run low across the world. A significantly reduced stream of Chinese fuel exports in recent months has left Asia shorter on supply and more sensitive to disruptions as consumption recovers with countries easing virus restrictions.
That means demand for oil continues to be strong in the world's biggest consuming region even as prices climb to the highest in seven years, adding to inflationary pressure that is hurting consumers and putting pressure on governments and central banks all over the world.
"Refiners that are not limited by turnarounds will be looking to run processing higher," said Ms Daphne Ho, an analyst at Wood Mackenzie. Fuel is likely to remain in short supply through March and April, she added.
In India, state-run processors have been seeking to buy more crude for March and April, with at least 18 of its 23 refineries operating above nameplate capacity in January. Reliance Industries, the country's second biggest refiner, deferred maintenance at one of its crude units at the Jamnagar refining complex by six months to capitalise on the high fuel margins.
South Korea's largest refiner, SK Innovation, plans to raise utilisation rates at its Ulsan refinery to an average of 85 per cent in the first three months of the year, up from 68 per cent in the previous quarter amid a strong gasoline market, a company spokesman said.
In Taiwan, the strength in the gasoline market means CPC is set to further raise processing rates, which are currently above 90 per cent at Dalin and more than 80 per cent at Taoyuan, a company official said.
By comparison, any increase in utilisation rates in Europe is likely to be limited due to high natural gas and carbon costs. Spring maintenance in the United States is likely to drive lower refinery availability as well, Ms Ho said.
A net loss in global refining capacity last year has "dashed hopes of an alleviation of supply tightness in the near term," Ms Serena Huang, an analyst at Vortexa, said in a note this week. While new capacity coming online this year will exceed last year's drop, the additions are likely to become available only by the second half, she said.