Asia Oil Refiners Mull Run Cuts With Margins At 16 yrs. Low For Season

[francoba + 93]

Asia’s oil refiners are considering reducing output after margins slumped to their lowest for the season since 2003, according to industry sources and Refinitiv data.Companies that planned to trim output include SK Energy, a unit of SK Innovation, the Singapore Refinery Company (SRC), owned by PetroChina and Chevron Corp and at least one refiner in Thailand, five people familiar with the matter said. In China, independent refiners known as ‘teapots’, which account for about a fifth of the country’s crude imports, operated at below 50% of capacity on average in April through May, versus 64% in the first quarter, said Zang Wengang, an analyst with Sublime Information Co. A spokeswoman for SK Innovation spokeswoman declined to comment, while SRC did not respond to a request for comment. The people familiar with the matter declined to be identified because they are not authorized to speak to media- wrote Reuters.

[Falcon + 222]

A report out a few months ago stated that 2.86 mm bbls/day of NEW REFINING CAPAVITY coming online in 2019.  It's starting.

Most in Asia, some in Africa.  For example Asian countries are tired of paying China for refined products.  So build their own refineries.  

Too much oil.

Too many refineries.

It eventually catches up with market.

Same gonna happen with US product to Mexico.  Traditionally Mexico shipped their oil to US gulf refineries and US shipped fuel back. Mexico now updating old refineries and going to build more.  Will refine own oil. Extra capacity in US.

Edited May 23, 2019 by Falcon

[Matthew w + 27]

3 hours ago, Falcon said:

A report out a few months ago stated that 2.86 mm bbls/day of NEW REFINING CAPAVITY coming online in 2019.  It's starting.

Most in Asia, some in Africa.  For example Asian countries are tired of paying China for refined products.  So build their own refineries.  

Too much oil.

Too many refineries.

It eventually catches up with market.

Same gonna happen with US product to Mexico.  Traditionally Mexico shipped their oil to US gulf refineries and US shipped fuel back. Mexico now updating old refineries and going to build more.  Will refine own oil. Extra capacity in US.

Was this headline what caused the oil to plummet today? Or was it that in conjunction with further trade worries?

Based on your analysis do you see more downside from here?

I know it's quite impossible to really predict the price of oil long term, to many unknown variables. Any answers are much appreciated.

As well, anyone else is welcome to chime in and add their input. I'd just like to gauge what kind of damage will be done to my oil company securities in the near to medium future. It will ease the psychological pain if a major downturn is expected.

Thank you to anyone that answers in advance.

 

Edited May 23, 2019 by Matthew w

[Falcon + 222]

17 minutes ago, Matthew w said:

 

Thank you to anyone that answers in advance.

 

I do not believe refinery margins in Asia have anything to do with today's crash.

My opinion :

 Oil has plateaued since beginning of April. Had trouble breaking out of resistance. 

I believe today had everything to do with China. Oil price mirrored S&P 500 . 

Traders don't want to be long or short anything. Very uncertain times with China and Iran.  Would rather sit this market out until China and Iran become more clear.

I think oil and market could move 10% or more after Trump meets Xi. Which way ?  Depends on whether we get a trade deal or not. 

Edited May 23, 2019 by Falcon

[Matthew w + 27]

That's sound and logical, probably those going long got caught having to cover their positions. It was a volatile move, I can't remember the last time it dropped 4-5%. I wouldn't anticipate a trade deal come mid June, likely positive rhetoric at most. 

If a trade deal happens it will be for political reasons and closer to the elections, which will ultimately result in America having to compromise on certain issues. In my opinion the Chinese have a fundamentally different mode of thinking, one that cannot be reconciled with Western ideology. Compromising on certain aspects of trade will be impossible if it requires the Chinese to submit any amount of Sovereignty.

In the long run, oil will be fine, new supply chains will develop around the world and America will be fine. It's really China that will hurt if they don't secure a trade deal. The main issue in my opinion is the amount of supply, you can forget the demand equation for now. The world is awash in it, especially so if shale keeps growing. 

I know KSA for social stability needed to cut supply, however, it allowed shale to flourish and adapt. We'd be in a different supply dynamics had they never support the market after the 2014-2015 crash.

 

Edited May 23, 2019 by Matthew w