Refineries are now incurring a loss on production of petrol, with the margin between crude oil and petrol turning negative, due to sluggish demand.
Traditionally, the differential between crude oil and petrol (the margin for refineries) has been $10-15 or even more per barrel. Two months before, it was $10 per barrel. It turned negative on November 11. “The gasoline market is the weakest in three years. This can be attributed to lukewarm demand and ample supplies. From being negative about two weeks ago, it has turned marginally positive. However, some firming up is expected, as demand in West Asia is still holding up well and the summer driving season in Australia is about to begin,” said Sharmilpal Kaur, managing editor, Platts Asia & AG.
According to Platts data, the 92RON gasoline/Asia Brent December crack (differential) was at minus 55 cents/barrel yesterday, indicating the market continued to struggle to turn upwards. The crack had climbed to minus three cents/barrel on November 25, but a failed rally in the US markets weighed heavily on Asian markets, causing it to slip further.
Kaur added while refineries might claim losses on refining, this might not be true. “Usually, refineries are configured in a way that they can optimise their produce by changing the crude mix,” she said. The margins on middle distillates such as diesel, jet fuel and kerosene are firm. Oil marketing firms review petrol prices on a fortnightly basis. They calculate the price of petrol based on its trade parity (80 per cent import price weight and 20 per cent export price weight) for the previous fortnight.
The trend for this fortnight points to a further cut in prices. After the decontrol of petrol in June last year, the price is Delhi had moved up 39 per cent.
