By The Best Investment Manager, Financial Market’s Journalist and SEO Mastermind
Oil refiners in Asia, Europe, and the United States are facing a drop in profitability to multi-year lows, signaling a downturn for an industry that had seen surging returns post-pandemic. This decline highlights the current slowdown in global demand, particularly due to soft consumer and industrial demand in China and the rising penetration of electric vehicles.
Refiners such as TotalEnergies and trading firms like Glencore enjoyed bumper profits in recent years, but the refining supercycle may be coming to an end as supply catches up with slower-growing fuel demand. Singapore refining profits fell to $1.63 a barrel, while Asia’s diesel margins hit a three-year low, reflecting the weak Chinese economy and soft fuel demand.
In the United States, the key measure of overall profitability, the 3-2-1 crack spread, slipped below $15 a barrel for the first time since 2021. Gulf Coast gasoline margins and diesel margins have also seen significant drops compared to last year.
Oversupply in the global diesel market, along with the startup of new refineries in countries like Nigeria, Mexico, Kuwait, and Oman, has further pressured margins. The immediate outlook remains weak, with refining profits expected to stay low for the rest of the year.
Despite some potential support from seasonal demand, the industry is facing challenges that could continue to impact profitability in the coming months. It’s essential for investors and stakeholders to monitor these trends closely and adapt their strategies accordingly.