Global Refinery Margins Rebound In Q3

Refinery margins have rebounded from lows of Q2, driven by transport fuels and jet fuel, a trend expected to continue throughout 2023 according to Reuters.

• Profit on refining a barrel of crude has surged 33% year to date in Europe and the US, while profits are up by around 9% in Asia.
• Recovering profit margins are expected to encourage complex refiners to maximise yields of transport fuels.
• However, this is likely to create excess naphtha as a byproduct, which will have a downside risk for feedstock margins given that petrochemical demand is weak.
• “Chronic weakness in global naphtha cracks is being offset, at least for now, by bullish HSFO cracks, especially in Asia and Europe,” said Eugene Lindell, head of refined products at consultancy FGE said in a note.
• In Q4 margins could weaken significantly, as naphtha margins show little sign of improvement in the next six months, while gasoline should weaken when refiners move to cheaper winter grades. Nonetheless, margins are expected to be above levels in 2020 and 2021.