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REFINERY MARGIN TRACKER: Singapore margins strengthen as Chinese import taxes take effect

Highlights

Singapore gasoline exports increase

Chinese tax cuts import, export volumes

Singapore cracking margins are tracking higher after China's new tax on gasoline blending component imports went into effect, an analysis by S&P Global Platts showed June 28, forcing some Chinese refiners to cancel export gasoline shipments.

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Also supporting Singapore margins were a fall in stocks of light distillate inventories, which include gasoline and blend stocks such as naphtha and reformate, as exports increased with rising demand due to a gradual easing in coronavirus restrictions in some parts of the Asia-Pacific region.

Singapore's light distillate inventories fell to 13.482 million barrels for the week ended June 23, data from Enterprise Singapore showed, after hitting a nine-week high of 14.225 million barrels the week earlier.

As a result, Basrah Light cracking margins in Singapore averaged minus $5.61/b for the week ended June 25, compared with minus $5.82/b the week earlier, according to S&P Global Platts Analytics margin data.

Australia's imports of Singapore gasoline increased, as availability of barrels from traditional sources like China and South Korea has fallen, sources said.

Total exports of gasoline from Singapore for the week ended June 23 were up 31.81% week on week at 504,853 mt, or about 4.3 million barrels, with exports to Australia at 91,646 mt, or about 775,000 barrels.

However, margin rises were capped by increasing imports. Week-on-week Singapore imports of gasoline doubled for the week ended June 23 to average 399,956 mt, or about 3.4 million barrels.

Chinese tax, quotas impact exports

According to sources familiar with the situation, PetroChina's 110,000 b/d Daqing refinery in Heilongjiang, China's northernmost province, planned to cancel gasoline exports in June after a tax on importing mixed aromatics went into effect June 12, cutting into supply.

Overall, Chinese gasoline exports have fallen, averaging 167,000 b/d for the week ended June 18, compared with the four-week average of 202,000 b/d, according to Kpler tracking data. For the week ended June 28, the fall is more precipitous at 16,000 b/d.

"Asia is now confronted with a structural excess of refining capacity," analyst Alex Yap said on a recent Platts Analytics webinar, adding it will "necessitate a painful period of readjustment."

The rationalization of Asian refinery capacity has been accelerating, with Shell announcing in early May the capacity reduction of its Singapore refinery would be moved up from 2023 to the end of July 2021, cutting capacity from 500,000 b/d to 300,000 b/d.

However, it is continued "weakness in middle distillates" weighing on Asian refining margins, said Yap, noting this excess is "why Asia continues to lag other regions."

Positive implications from Chinese tax

China on June 12 levied consumption taxes on three semi-processed feedstock products: bitumen blend, mixed aromatics, and light cycle oil, a gasoil blendstock.

Yap expects to see positive implications from China's tax on both crude and refined products markets.

After a pre-tax spike in April and May, when heavy crude and bitumen imports rose to around to 400,000 b/d, Chinese imports have fallen to about 50,000 b/d. Yap expects lighter crude imports will rise in the second half of the year to make up for the loss of these volumes.

However, volumes of mixed aromatics used in gasoline blending and light cycle oil will collapse. Platts Analytics expects mixed aromatics running at about 100,000-150,000 b/d prior to the tax will fall to about 30,000 b/d. Light cycle oil will fall from about 500,000 b/d to 100,000 b/d.

"The net effect is product supply is being taken out of the domestic Chinese market," Yap said, adding the "net effect of that is going to be lower exports."

Characterizing Chinese exports as "pretty strong so far this year," Yap said after averaging over 1.4 million b/d in March 2021, exports are expected to move down to about 500,000 b/d in June, a move which "will be positive for Asian refining overall."

US Atlantic Coast Refining Margin Averages ($/b)

Bonny Light Cracking

Arab Light Cracking

Bakken Crude Cracking

Forties Cracking

Week ending June 25

10.06

8.85

8.22

8.62

Week ending June 18

9.08

7.20

7.96

8.81

Q2 to date

11.41

9.38

10.06

10.30

Q2-20

2.97

2.06

1.02

2.84

Q1-21

7.38

6.52

5.95

6.21

Q4-20

4.18

3.66

3.46

4.31

Source: S&P Global Platts Analytics

US Gulf Coast Refining Margin Averages ($/b)

Arab Light Cracking

WTI MEH Cracking

LLS Cracking

Mars Coking

Week ending June 25

9.80

12.03

11.32

11.26

Week ending June 18

7.81

10.63

9.25

9.24

Q2 to date

10.09

13.10

11.73

11.48

Q2-20

1.48

3.50

2.73

1.97

Q1-21

7.66

10.42

9.32

8.64

Q4-20

3.30

5.93

5.36

4.16

Source: S&P Global Platts Analytics

US Midwest Refining Margin Averages ($/b)

Bakken Cracking

WTI Cushing Cracking

Syncrude Cracking

WCS ex-Cushing Coking

Week ending June 25

13.96

11.31

16.00

14.20

Week ending June 18

13.45

10.49

15.06

12.84

Q2 to date

16.73

14.85

18.04

15.85

Q2-20

4.57

3.78

5.41

3.76

Q1-21

10.69

9.31

10.96

9.10

Q4-20

6.48

4.43

7.53

4.20

Source: S&P Global Platts Analytics

US West Coast Refining Margin Averages ($/b)

ANS Cracking

Vasconia Coking

Arab Medium Coking

Napo Coking

Week ending June 25

17.13

23.08

17.72

18.21

Week ending June 18

15.00

19.85

14.77

14.81

Q2 to date

16.93

21.42

18.18

16.83

Q2-20

9.97

11.90

9.74

11.74

Q1-21

13.00

16.02

13.87

12.21

Q4-20

10.00

11.59

9.53

9.39

Source: S&P Global Platts Analytics

Singapore Refining Margin Averages ($/b)

Dubai Cracking

Arab Light Cracking

ESPO Cracking

Arab Light Coking

Week ending June 25

-1.62

-2.67

-0.14

-2.33

Week ending June 18

-1.91

-2.92

-0.17

-2.65

Q1 to date

-1.27

-2.30

0.74

-2.06

Q2-20

-2.87

4.11

-3.47

4.10

Q1-21

-0.99

-1.19

0.97

-1.19

Q4-20

-1.07

-0.45

-1.14

-0.57

Source: S&P Global Platts Analytics

ARA Refining Margin Averages ($/b)

WTI MEH Cracking

Bonny Light Cracking

Arab Light Cracking

Urals Cracking

Week ending June 25

2.61

4.16

2.57

3.06

Week ending June 18

2.02

3.70

2.55

2.95

Q2 to date

3.58

4.97

2.64

4.28

Q2-20

-1.72

1.06

4.11

-1.26

Q1-21

1.46

3.23

0.67

2.83

Q4-20

0.91

1.68

0.38

0.91

Source: S&P Global Platts Analytics

Italy Refining Margin Averages ($/b)

Urals Cracking

CPC Blend Cracking

Arab Light Cracking

WTI MEH Cracking

Week ending June 25

3.06

4.79

1.16

1.84

Week ending June 18

2.85

3.98

1.10

1.21

Q2 to date

3.63

5.49

1.05

2.45

Q2-20

-2.31

1.51

3.75

-2.54

Q1-21

2.82

4.12

-0.42

0.81

Q4-20

1.14

2.81

-0.18

0.62

Source: S&P Global Platts Analytics