Asian refining margins have fallen to their lowest seasonal levels since 2020, driven by an increase in diesel and gasoline supplies following the end of peak summer travel demand. Industry analysts and officials reported that these weak margins could lead refiners to further reduce their output, adding to previous cuts made earlier this year when margins were similarly low, which in turn has affected crude demand in Asia—the region that significantly contributes to global oil demand growth.
Amrita Sen, founder and director of Research at consultancy Energy Aspects, noted that Asia has been reducing refinery runs since May, with cuts of 400,000 to 500,000 barrels per day, including in China. For the fourth quarter, an additional 300,000 bpd of run cuts have already been factored in, with a potential further reduction of 100,000 bpd depending on current margin conditions.
As of this week, complex refining margins in Singapore, a key regional indicator, have dropped to $1.62 per barrel, representing a 68% decline from the same period last month. This downturn in margins has occurred earlier than usual, exacerbated by disappointing U.S. summer gasoline consumption and a slowdown in demand from China.