Oil investors rattled by the threat of US output can find some cheer from diesel demand in Asia.<\/p>\n
Strong consumption of the fuel — used to power everything from trucks to ships and factories — underpinned crude\u2019s bull run last year, a rally that\u2019s now being threatened by surging American production. Still, while the risk of a crude glut looms, refineries being shut for spring-season maintenance is set to squeeze diesel supplies in the Asian market at a time when demand is being boosted by healthy economic growth.<\/p>\n
That\u2019s helping alleviate concerns over an expected flood in Chinese fuel exports, which during the years of the global oil price crash exacerbated the industry\u2019s pain by wreaking havoc on regional profits from producing diesel. Returns in Asia from turning crude into diesel in January surged to the highest level since 2014, with appetite for the heating fuel spurred by China\u2019s winter gas shortage and record freezing temperatures in the US.<\/p>\n
\u201cDiesel, which is used in industrial activities, has been seeing robust demand since last year and the low global inventories for the fuel will continue to support margins,\u201d Ko Gwang-cheol, head of investor relations at South Korean refiner S-Oil Corp., said last month.<\/p>\n
Prices will be supported by the \u201csignificant growth recovery we\u2019re seeing from the global economy,\u201d he said.<\/p>\n
Over in India, the nation\u2019s biggest refiner is also expecting the sunny days to persist. \u201cGrowth is seen quite robust this year as well,\u201d said Sanjiv Singh, the chairman of Indian Oil Corp. \u201cWe are seeing over 5 per cent growth in diesel.\u201d<\/p>\n
While upcoming seasonal maintenance at refineries may support diesel margins over the next few months, the market may end up with too much supply in the latter half of the year once the plants are back online, according to Ehsan Ul-Haq, a London-based director of crude oil and refined products at Resource Economist.<\/p>\n
Infrastructure Spending<\/p>\n
\u201cThanks to economic growth, refiners are hoping that the region would absorb all diesel barrels, but the region cannot afford any unexpected dip in demand,\u201d he said.<\/p>\n
Still, Fitch Group\u2019s BMI Research expects demand for diesel to stay strong this year as Asia\u2019s emerging markets boost infrastructure spending and encourage construction activity. Meanwhile, supplies are set to tighten around March and April because of refinery maintenance in nations including India and Sri Lanka, said WengInn Chin, an analyst at industry consultant FGE in Singapore.<\/p>\n
Plants are also going to undergo work in the Atlantic basin, particularly in the U. S. Gulf Coast where maintenance last year was delayed because of Hurricane Harvey, he said. The so-called crack spread in Asia, or the premium of diesel over Middle East benchmark Dubai crude, was at about $15 a barrel on Friday after touching $17.04 on January 29, the highest since November 2014.<\/p>\n","protected":false},"excerpt":{"rendered":"
Oil investors rattled by the threat of US output can find some cheer from diesel demand in Asia. Strong consumption of the fuel — used to power everything from trucks to ships and factories — underpinned crude\u2019s bull run last year, a rally that\u2019s now being threatened by surging American production. Still, while the risk of a crude glut looms, refineries being shut for spring-season maintenance is set to squeeze diesel supplies in the Asian market at a time when demand is being boosted by healthy economic growth. That\u2019s helping alleviate concerns over an expected flood in Chinese fuel exports, […]<\/p>\n","protected":false},"author":44,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[133],"tags":[],"class_list":["post-149047","post","type-post","status-publish","format-standard","hentry","category-oil-gas"],"acf":[],"_links":{"self":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/149047","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/comments?post=149047"}],"version-history":[{"count":0,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/149047\/revisions"}],"wp:attachment":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/media?parent=149047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/categories?post=149047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/tags?post=149047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}