Black gold, white knuckles: Oil refiners face rollercoaster ride as fuel margins seesaw

SINGAPORE (Reuters) – Oil product margins have been tossed around on a wild rollercoaster ride in October, as factors like impending Iran sanctions, the Sino-American trade war and upcoming new shipping regulations yank fuel profits up, down and back again. Some profit margins, known as crack spreads in the industry, including for Asian fuel oil and gasoil have boomed, while others, like Asian and European gasoline cracks, have plunged. Crack spreads are the difference between the price of crude oil and the price of the products such as diesel and gasoline refined from it. The term is derived from the cracking process sometimes used in petroleum refining to produce the fuels. Asia’s cracks for gasoil and fuel oil have gained 16.3 percent and a whopping 124.3 percent, respectively, since the start of the year – with most of the jump happening this month. “These cracks are extraordinary,” said Sukrit Vijayakar, director of Indian energy consultancy Trifecta. Vijayakar, a veteran of India’s refining industry, said such high gasoil and fuel oil cracks should move a refiner to maximize these products. “Keenly aware that these cracks are extraordinary, he (the refiner) should protect such production decisions by hedging the cracks…as an insurance… continue reading

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Source: CTRM Center

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