In this list

FEATURE: Asian gasoil demand to grow in 2021, but faces bumpy ride

Agriculture | Grains | Energy | Coal | Thermal Coal | LNG | Natural Gas | Oil | Crude Oil | Refined Products | Naphtha | Metals | Steel | Steel Raw Materials

Market Movers Asia, March 27-31: South Korea eyes oil supply security, China could see improvement in steel demand

Energy | Oil | Refined Products | Jet Fuel

Jet Fuel

Energy | Oil | Energy Transition

APPEC 2023

Agriculture | Energy | Energy Transition | Oil | Electric Power | Natural Gas | Biofuels | Renewables | Refined Products | Jet Fuel | Hydrogen | Electricity

INTERVIEW: UK's LCCC anticipates AR5 process improvements, new CFD markets

Energy | Coal | Energy Transition | Thermal Coal | Renewables | Coking Coal

China's hunger for coal sparks debate on self-sufficiency and imports

For full access to real-time updates, breaking news, analysis, pricing and data visualization subscribe today.

Subscribe Now

FEATURE: Asian gasoil demand to grow in 2021, but faces bumpy ride


Demand recovery hinges on mass vaccination rollouts

Refinery closures open new outlets for demand

Regional refiners to pare back activity on prevailing poor margins

  • Author
  • Clarice Chiam    Su Yeen Cheong    Benjamin Yap
  • Editor
  • Agamoni Ghosh
  • Commodity
  • Oil

Singapore — The Asian gasoil market will see further demand growth in 2021, with participants expecting an upswing in consumption especially in the second half of the year, but industry sources S&P Global Platts spoke to cautioned that a slower than expected rollout of mass vaccination programs, complications arising from the emergence of new strains of the virus, as well as the possibility of continued low product margins, could lead to a bumpy road to recovery.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

The prompt quarterly Q1/Q2 2021 Singapore gasoil spread -- an indication of near-term sentiment -- averaged minus 45 cents/b throughout December, 2020 compared with the Q3/Q4 average spread of minus 27 cents/b over the same month. The Q3/Q4 spread has since narrowed further, and was assessed at minus 3 cents at the 0830 GMT Asian close Jan. 8.

Industry experts noted that many countries have fallen short of their initial mass vaccination targets, even as local transmission numbers have risen higher. Furthermore, the recent emergence of highly infectious variants of the coronavirus has injected fresh uncertainty into the gasoil demand outlook, sources said.

"The vaccination programs for many countries are falling behind schedule, so while demand for gasoil will surely grow this year, it's more a question of by what extent or quantum this will be," a trader said.

S&P Global Platts Analytics echoed similar sentiments, saying that while the baseline assumption considers that the vaccines' effects on global economic activity will start to become apparent in second half 2021, there were still variables that would impact the pace of recovery.

"Platts Analytics expects Asia's diesel demand, which is estimated to have dropped 2.7% year on year in 2020 to 9.8 million b/d, to bounce back by 3.2% year on year in 2021 as the economy in the region recovers," said JY Lim, oil markets adviser at Platts Analytics.

"Over the last few weeks, however, some Asian countries are seeing more daily cases of COVID-19, and they have to be watched closely as the pace of the outbreak will have a direct bearing on the regional economic outlook and thereby oil demand, especially as the rollout of vaccines has been slow so far," Lim added.


Market participants have also been mulling over regional supply balances which went through significant upheaval in 2020. Industry experts said the pandemic accelerated a wave of refinery closes and changed the global refining landscape, with several regional refiners forced to close or review operations due to poor refining margins.

BP's plans to shut Australia's largest refinery in Kwinana, as well as Pilipinas Shell Petroleum Corp's plans to shutter its Tabangao-based refinery in the Philippines, will translate to higher import appetite from key demand centers. This will help offset a wave of new supply streams entering the market, sources said.

One example is China's private greenfield 20 million mt/year Zhejiang Petroleum & Chemical, designed to produce 1.7 million mt/year of gasoil. In November 2020, the Chinese Ministry of Commerce granted export quotas to ZPC, adding the refiner to a fuel exporting list which had previously been restricted to only five state-owned companies. ZPC was allocated an export quota of 2,000,000 mt for oil products during the first round for 2021. Market participants also noted the private refiner's output could be elevated in H2 2021 with the commencement of its 400,000 b/d Phase 2 project.

In addition, gasoil output from two refinery start-ups in the Persian Gulf -- Saudi Arabia's Jazan and Kuwait's Al-Zour -- are set to spill fresh barrels into the spot market.


Participants also opined that one of the constant themes brought over from 2020 into the new year could be the fact that refiners may choose to continue to run at lower rates due to dismal margins.

"There will be a global recovery for gasoil demand, but the question remains about margins, which are still low... that leads to questions about what forward margins are going to look like for more and more refineries, and will refiners continue to stay at reduced rates for longer?," a Singapore-based trader said.

In a report published Jan. 6, Platts Analytics said that while gasoil cracks have steadily improved since early-November 2020, it remains statistically weak.

"Asian refining margins have been in negative territory for many months... [and] the regional surplus of capacity continues to affect product balances," Platts Analytics said in a separate report released in December.

"Middle distillate stocks [have] remained high due to weak jet fuel demand and as refiners in the region continued to keep gasoil yield high... in 2021, there is still too much capacity chasing after too little demand," the report said.

Asia Pacific refinery closures, reviews, and start-ups over 2020-2021
Refinery closures/reviews
Capacity (b/d)
BP announced in October 2020 plans to convert the refinery into an import terminal.
Ampol announced the start of a comprehensive review of the refinery in October 2020, with a view to turning the facility into an import terminal.
Pilipinas Shell Petroleum Corp. closed the refinery in July 2020, with the facility turned into an import site.
Marsden Point
New Zealand
New Zealand's Refining NZ said in a statement in December 2020 that it is moving ahead with plans to convert the refinery into an import terminal.
Refinery start-ups
Zhejiang Petroleum & Chemical
The private refinery, which started in 2020, is expected to commence operations for its new 400,000 b/d Phase 2 units in Q2 2021.
Saudi Arabia
Expected to commence operations at the end of Q1 2021. S&P Global Platts previously reported that at full capacity, Jazan will produce 209,900 b/d of ultra-low sulfur diesel, accounting for 19% of Saudi Aramco's gross ULSD output of 1.09 million b/d from all its refineries, which include joint venture refineries.
Expected to commence operations in 2021.

Source: S&P Global Platts Analytics