China Independent Refineries’ Oil Refining Margins Improving

The oil refining margins at Shandong independent refineries averaged at RMB 400.9/mt in February, up 42.4% from the same period of January. In the future, international crude oil may continue slipping, and the market demand for some refined oil products will improve. Accordingly, the independent refineries’ margins will continue increasing.

According to SCI, the total processing volume of imported crude oil at mainstream Shandong independent refineries was around 65,070kt in 2017, covering 71.87% of the refineries’ feedstock processing volume. Imported crude oil has become the most important feedstock for independent refineries. In addition, most independent refineries set Brent prices as the benchmark of their feedstock procurement. Therefore, international crude oil prices are impacting the feedstock costs greatly.

In 2018, OPEC members are trying to protect the results achieved through their crude oil output reduction. But the U.S. crude oil output is at a high level. In the meantime, the turmoil in the Middle East impacted international crude oil prices. At present, the feedstock costs at independent refineries are around RMB 3,850/mt.

On independent refineries’ revenues, gasoline prices, diesel prices, petcoke prices, LPG prices and naphtha prices went to different directions in February. According to calculations, the products’ sales were down RMB 103/mt in February from January.

There is a big possibility that international crude oil prices will slip in March, and the market demand for diesel will improve. All in all, the independent refineries’ oil refining margins may continue rising in March.