KARACHI: During April 2019, Gross Refining Margins (GRMs) averaged US$9.56/bbl, marking an increase of US$2.07/bbl or 29 % YoY. GRMs during the month trended upwards as Motor Gasoline (MS) and Fuel Oil (FO) markets strengthened amid spring turnarounds.[the_ad id=”31605″]Gasoline restocking ahead of elections in India and Indonesia, as well as ongoing preparations for the Holy month of Ramadan, spurred additional import requirements that pressured inventory levels and helped ease the region’s gasoline surplus.
Fuel Oil spread moved upward from negative US$11.79/bbl to negative US$5.26/bbl, due to a pick-up in exports in Asia. On the other hand, Naphtha spreads slumped to negative US$8.64/bbl from negative US$3.85/bbl.
Furthermore, High-Speed Diesel (HSD) spreads posted a 13% YoY increase, while in the case of Kerosene and Jet fuel (JP-1), each down by 10% YoY.
On a sequential basis, average Gross Refining Margins (GRMs) improved by 42% MoM during April 2019 on account of robust performance at the top of the barrel supported by scheduled and unscheduled refinery maintenance, which provided relief to the gasoline surplus environment prevalent in recent months. HSD, NAPTHA and LDO spreads increased MoM by 19%, 16% and 8%, respectively.
“We expect refinery margins to recover in the short term, owing to anticipated support from stronger MS margins and increasing demand from India & Indonesia. On the other hand, we expect that IMO 2020 regulations could support some demand shift from Furnace oil (FO) to MS/HSD as 1st January 2020 approaches which could pave way for further weakening of FO spreads,” Arslan Ahmed at JS Global Capital said.