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Asian petrol profit margins ride high, helped by jump in India demand

[SINGAPORE] Petrol producers in Asia are enjoying their best profit margins in weeks, boosted by unexpected demand for imports from India as refineries there shut for upgrades needed to supply cleaner fuels next year in line with domestic regulations.

But industry watchers say the surge could be short-lived, with Chinese refineries now running flat out, producing significant petrol for export that will depress prices.

Asia's petrol 'crack' - premiums of refining Brent crude into 92-octane petrol - neared a six-week high of US$10.72 a barrel on Nov 12. That fell to almost US$9 on Nov 14, but this was still more than 18 times higher than levels from the same time a year ago.

The jump was all the more surprising given gasoline demand is typically lower during the current season, viewed as 'off-peak' with fewer motorists on Asia's roads because of factors like monsoon rains in India.

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"Petrol cracks surged on sustained purchases from India and Indonesia amidst the (supply) tightness seen in the United States," said Singapore-based Sri Paravaikkarasu, director for Asia Oil at consulting firm FGE. US petrol inventories fell for six straight weeks before rising last week, amid plant outages in places like Texas and Tennessee.

"This alongside, an expected increase in Vietnam's imports, should offer short-term support for gasoline cracks," Mr Paravaikkarasu said.

Indonesian September-November demand was seen firm, averaging around 10 million barrels a month, while import demand from Malaysia was also strong as refineries at Port Dickson were unable to receive and process crude oil into petrol because of on-site operational problems.

"Flows to Malaysia have ramped up significantly (partly due to Port Dickson refinery issues)," said Michael Dei-Michei, head of research at JBC Energy in Vienna.

India's September petrol imports, at 410,000 tonnes, were the highest in at least eight years. October imports were near 200,000, data from Refinitiv Oil Research showed, or 60 per cent higher than the January-June monthly average.

In the longer run, however, industry players expect China's high refinery throughput to spill over into a rebound in exports that will squeeze prices and margins.

After September exports hit 1.67 million tonnes, near March 2018's monthly record of 1.7 million tonnes, China's exports slowed.

"But China's exports can't stay low for long," said an industry source who tracks demand for petrol.

"Additionally, Vietnam's Nghi Son (refinery) will complete its turnaround next month while some of the petrol-making units in South Korea have returned to operations," the same person said.

"Given these (factors), it seems rather difficult for petrol cracks to maintain their current levels in December."

REUTERS