July 27, 2018 / 8:36 AM / 22 days ago

Singapore refining margins on pace for biggest monthly gain since 2015

* Singapore margin rises 65 pct from June

* Current margin contrasts with last month’s 2-year low

* Supply of fuel oil, naphtha seen tight

* Jet fuel in demand as people take to the sky

By Seng Li Peng

SINGAPORE, July 27 (Reuters) - Refining margins in Singapore are set for their biggest monthly gain since 2015 as surging demand for gasoline and jet fuel lifted fuel prices at the same time crude oil dropped, reducing feedstock costs for refiners.

The profit DUB-SIN-REF from refining a barrel of benchmark Dubai crude into fuels in Singapore rose to $6.81 a barrel on Wednesday, the most since May 22. The margin, a proxy for refiners across Asia, was at $6.70 on Thursday, on pace for a 66 percent monthly increase since the of June, the most since September 2015.

Profit margins in July rebounded from a two-year low $3.85 a barrel in June. Since the end of last month, the profit from producing gasoline GL92-SIN-CRK more than doubled and margins for naphtha rose 53 percent, pushing the gains in overall margins. NAF-SIN-CRK

“Refining margins appear to have been supported by a combination of factors, including seasonally-stronger demand for gasoline and (middle) distillates, particularly across the emerging markets,” said Peter Lee, oil & gas analyst of BMI Research.

Fuel oil margins in July were also supported as less supply arrived in Asia from Europe.

Margins are unlikely to maintain their recent gains as Chinese fuel exports may continue to increase and oil prices rebound.

“Risks to subsequent quarters’ margins lie to the downside, amid relentless fuels exports out of China, stronger oil prices and potential spill-over effects onto retail prices and consumer appetite,” said BMI’s Lee.

China’s record-breaking gasoil, or diesel, exports have contributed to growing gasoil stockpiles in Asia.

Gasoline inventories in Asia also remain high, despite solid demand in Europe and the United States, with Singapore inventories reported at four-month highs this week.

Even fuel oil margins should drop as more supply comes onto the market.

“We could see pressure on fuel oil cracks emerge as surging fuel-oil rich crude production in Saudi Arabia, UAE, and Russia is likely to boost fuel oil supplies,” said Eugene Lindell, an analyst at JBC Energy.

Reporting by Seng Li Peng; Additional reporting by Florence Tan; Editing by Christian Schmollinger

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