Asia’s Diesel Profit Likely to Rise for the First Time after 4 Years

Asia’s Diesel Profit Likely to Rise for the First Time after 4 Years

There is finally some glimmer of hope for Asia’s refiners as their profit margin from diesel production might finally improve after 4 long years. The profit seen will be largely due to the growing infrastructure, mining, construction and oil & gas exploration sectors.

According to the report made by trade analysts, there will be some recover and price stabilization for crude oil after last year’s high temperature. The producer countries may spur up the prices.

According to Suresh Sivanandam, a senior manager at refining research ‘Asia Pacific’, the demand and growth in diesel will likely let the refiners profit for producing diesel barrels from the land of oil – Dubai. The initial cost was around the $10.70 a barrel (recorded in 2016), but now, it is estimated to be around $11.40 a barrel. The growth margin seems to be very large.  ‘Asia Pacific’ is located at Wood Mackenzie, Singapore.

After 2013, this would be the 1st annual increase. According to reports collected by Thomson Reuters Eikon, in the year 2016, the average profit fell to a 7 year low of $10.60 per barrel. Though the refiners are likely to see some profit this year, it will still be less than the largest profit recorded i.e. of $26 per barrel in the year 2008, when China was the key importer of fuel

The coal miners continue to increase their consumption as the coal prices that swept in 2016 is likely to support the growth and demand of diesel in the year 2017.

Coal miners in Australia and Indonesia saw a growth in their output mostly because of skyrocketing prices in 2016. Woodmac’s Sivanandam hoped for the Indonesian growth in the coming year as well. He said, “The recovery in coal prices is expected to give some boost to diesel demand, after years of muted growth.”

Paravaikkarasu, the head of ‘East of Suez Oil’ at FGE energy consultants cited that continuous and stable growth in various other evolving economies should also help to support the growing diesel demand in Asia.

Use and Demand of Diesel

Diesel is used in various business sectors like in construction as fuel to run heavy vehicles and mining equipment. In Europe, it is used as heating fuel.

China has come up with a “Belt and Road Initiative”. This should improve the diesel demand and infrastructure investments in countries like Bangladesh, Myanmar and Pakistan. This report was made by an analyst from Energy Aspects. “The initiative will be a key driver of infrastructure investment in the coming years,” said the Energy Aspect expert.

Global Demand for Diesel

In the year 2017 the global demand for diesel is estimated to rise by 500,000 barrels/day (bpd), after a drop of 50,000 barrels/day in 2016. This boost is caused by a drilling activity in the United States and a mining expedition in China.

The Asian refinery capacity growth is estimated to exceed one million barrels per day in 2017. In the second half of the year, countries like India, Vietnam and China could face a diesel crunch.

While overall Asian demand should improve, growing refinery and condensate splitter runs in both Asia and the Middle East will keep the market well-supplied,” said FGE’s Paravaikkarasu.

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