Asia gasoline margins set to plunge in 2014
Singapore, December 5, 2013
Asian gasoline margins have peaked and are set to drop in 2014, as the Middle East ramps up refining capacity and a crush of cargoes come in from a European market flush with supplies.
Analysts, however, expect a growing shortage of the motor fuel in Indonesia and continued deficits in the Middle East to help keep Asian margins in the double digits.
The average benchmark Singapore gasoline margin, or crack, is expected to drop to around $11.50 a barrel in 2014, from $14 in 2011 and 2012, consulting and research firm ESAI Energy said.
Margins hit a peak over 2010 to 2012 in Asia and will come down in the four years to 2016, said Suresh Sivanandam, senior analyst of oils research for Asia Pacific at Wood Mackenzie.
"It was $12.80 a barrel for the period 2010-2012 and will be a dollar less from 2013-2016," he said, referring to the spread between Singapore 95-octane gasoline and Dubai oil prices.
The deficit of the motor fuel in the Middle East will narrow to 50,000 barrels-per-day (bpd) in 2018 from 320,000 bpd in 2013, Sivanandam said.
But any pessimism about gasoline cracks could be overdone, traders and analysts said, given that the Middle East will stay net short in the next five years while Indonesia is expected to emerge as the world's top importer of the fuel over the period.
"There are some views that gasoline will become useless in about 20, 30 years due to energy efficiency and renewable energy. But the important thing is that gasoline is still a major commodity now," a source from a North Asian refinery said.
Worries about China's exports will support cracks as well.
Only half of a targeted 5.38 million barrels-per-day new Middle Eastern refining capacity is expected to come online by 2020, while net exporter China may flip into a slight deficit in 2015, according to Energy Aspects.
JBC Energy sees exports from China, the world's No.2 gasoline consumer after the United States, dropping below 20,000 bpd in 2018 from about 120,000 bpd in 2013.
It is Europe's excess volumes of the motor fuel, estimated at between 400,000 to 500,000 bpd in the next five years by ESAI Energy, that will keep Asia's gasoline margin from scaling up.
"By 2018, gasoline fundamentals in Asia will be more or less balanced if you look at it from a broad, region-wide perspective," said John Galante, an analyst at ESAI.
"We have gasoline margins falling across regions, but Asia will remain higher than Europe."-Reuters