Refining Margin Negative for Three Consecutive Months... Middle East Crude Oil Export Premium Increase

[Asia Economy Reporter Hwang Yoon-joo] Refining margins have recorded negative values for three consecutive months. Saudi Arabia has raised the crude oil premium for exports to Asia again, which is analyzed as a measure in response to the forecast of a rebound in petroleum product demand starting in the second half of the year.

In the first week of June, the Singapore complex refining margin recorded minus $1.6 per barrel. It has shown negative values for 12 consecutive weeks since the third week of March.

Although international oil prices rose to the $30 level, the decline in petroleum product demand continues, and it seems unable to escape the quagmire of negative margins. To make matters worse, the price of crude oil imported from the Middle East is expected to rise starting in July.

On the 8th (local time), Saudi Arabia announced, "Together with Kuwait and the United Arab Emirates (UAE), we will end the voluntary additional production cut of 1.18 million barrels per day at the end of this month." Previously, Middle Eastern oil-producing countries including Saudi Arabia had cut production by 1.18 million barrels in addition to 9.7 million barrels per day to stabilize the crude oil market supply and demand. Saudi Arabia and Kuwait rank first and second among Korea's crude oil import countries, respectively.

The refining industry interprets this as Saudi Arabia adjusting export volumes. Saudi Arabia is known to have raised the July delivery crude oil selling premium (OSP) to the Asian region by $5.6 to $7.3. This is interpreted as a measure based on the forecast that although petroleum product demand fell to the worst level since 1997 in April, it will rebound from June onward.

An official from the refining industry said, "There is an analysis that petroleum demand will improve in the second half of the year," but added, "Given the current situation, uncertainty is too great, so market forecasts are meaningless."

This content was produced with the assistance of AI translation services.