London February 20 2023: The profit for making diesel in Asia has dropped to the lowest in almost a year, a sign that the market is adapting so far to the European ban on imports of the transport fuel from Russia.
The profit margin, or crack, on producing a barrel of gasoil, the building block for diesel, at a typical Singapore refinery slipped to $22.05 a barrel on Feb. 17, the lowest since March 16 last year.
Rather than being driven by concerns over the potential loss of Russian shipments of diesel, the market in Asia appears more reflective of ongoing strength in diesel exports from China and India.
China is expected to export about 2.4 million tonnes of diesel in February, equivalent to about 643,000 barrels per day (bpd), according to data compiled by Refinitiv Oil Research.
This would be up from January shipments of around 1.78 million tonnes and 2.32 million in December.
While the profit margin on diesel is shrinking, it’s still strong by historic standards, having rarely traded above $20 a barrel between 2014 and the end of 2021.
However, it’s worth noting that gasoline in Asia is currently treading a different path to diesel, largely because China is exporting less.
China exports of gasoline have been declining in recent months as domestic demand recovers, and Refinitiv has tracked only about 300,000 tonnes so far in February, well below the 625,000 tonnes in January and December’s 1.9 million tonnes.
The profit margin on producing a barrel of gasoline from Brent crude in Singapore ended at $11.94 a barrel on Feb. 17.
While this is below the peak so far in 2023 of $18.32 a barrel, the crack has been on an uptrend since its 2022 low of a loss of $4.66 a barrel on Oct. 26.
The crack is down 43% from its peak so far this year of $38.89 on Jan. 25, and is also 69% below its record high of $71.69 from June last year, reached in the aftermath of Russia’s Feb. 24 invasion of Ukraine.
