By YANGE IKYAA
Refinery margins in all main trading hubs weakened in November, as the performance of all product across the barrel in all regions lost ground m-o-m with the exception of Naphtha in Asia.
According to the OPEC Monthly Oil Market Report for December 2021, this downturn was attributed to a rise in product outputs as refineries tried to ramp-up run rates, following major turnarounds to replenish product inventory levels. In addition, the seasonal demand-side weakness amid renewed lockdown measures as a result of a rise in COVID-19 infection rates further weighed on product markets.
Going forward, a potential continuation of a rise in global refinery processing rates will most likely lead to a widening product balance and continued weakness in product markets in the coming month. Moreover, concerns over the spread of the Omicron variant is set to add to the downside and further suppress the robust recovery in jet fuel margins witnessed in recent months, particularly during the end of the year holiday season.
On the supply side, dirty tanker spot freight rates remained steady in November, as the expected year-end upward momentum had yet to show. For very large capacity carriers (VLCCs), the Middle East-to-East route averaged WS43, up 2% m-o-m. While this represented an improvement over November 2020, it is still well below pre-COVID levels for this time of year. For Suezmax, the West Africa-to-US Gulf Coast averaged WS61 for a decline of 6%.
In contrast, clean tanker spot rates strengthened, with gains both east and west of Suez. Optimism for the end of the year has been shaken somewhat by the uncertainty around the impact of the Omicron variant on economic activities, as well as the persistent imbalance in the tanker market.
Crude and Refined Products Trade Preliminary data show US crude imports in November partly recovered from a dip in the month before to average 6.4 mb/d. US crude exports also rose for the second month to average 2.9 mb/d.
China’s crude imports averaged 8.9 mb/d in October, the lowest since February 2018, although preliminary customs data shows a recovery in November with crude imports averaging 10.2 mb/d.
India’s crude imports feel back, following 2 months of gains, averaging 4.0 mb/d in October. In contrast, India’s product imports increased, driven by higher inflows of gasoline and fuel oil.
Japan’s crude imports fell for the second month in a row, averaging 2.4 mb/d in October. In OECD Europe, the latest data for August shows crude imports remaining strong at 8.7 mb/d, while crude exports continued to edge higher reaching 0.5 mb/d.