Major Chinese refineries' refining margins worsened in the past two weeks as product prices dropped after China lowered oil product prices on Oct 9, C1 research showed.
Based on ex-refinery prices of petroleum products, the margin for refining Daqing crude was minus Yuan 302/mt (minus US$6.43/bbl) on Oct 12, versus minus Yuan 226/mt/mt (minus US$4.80/bbl) two weeks ago. The gross margin for refining Oman crude was Yuan 349/mt (US$7.38/bbl) on the day, down by Yuan 215/mt (US$4.47/bbl) from two weeks ago.
Gasoil and gasoline ex-refinery prices dropped by Yuan 300/mt after the National Development and Reform Commission reduced the retail ceilings by Yuan 300/mt on Oct 9 and jet ex-refinery price declined by Yuan 109/mt month on month. In addition, LPG prices fell notably in South China. The integrated ex-refinery prices of petroleum products lost Yuan 150/mt in Northeast China and Yuan 181/mt in South China in the two weeks.
The costs of Daqing crude declined by Yuan 75/mt month on month to Yuan 6,124/mt for October, but those for Oman crude rose by US$1.29/bbl to US$107.88/bbl.
The margins are expected to be largely stable in the second half of October as petroleum product prices are not likely to fluctuate widely.
C1 started to use the ex-refinery price of 93-Ron gasoline to calculate the refining margins since May 2011 to better reflect the margins.
When calculating the refining margins based on market prices, C1 began to use mark-to-market principle for the margins of Oman crude on Apr 21, 2010. This means it uses the assessment for the previous day’s CFR price of Oman crude as feedstock cost instead of the mean price of the grade in the previous month, which can better reflect changes in international crude prices.
