Moody’s Investors Service says that the outlook for the Asian refining and marketing industry is stable, with Asian refiners seeing modest EBITDA growth of 1%-3% in 2016, as healthy demand for refined oil products drive higher refining outputs and support refining margins.
“Capacity rationalization in the region will ease the industry’s supply overhang, but economic slowdown in China means that demand growth will likely only match or marginally exceed capacity additions in 2016,” says Rachel Chua, a Moody’s analyst. “Chinese refiners have been ramping up capacity to reduce the country’s import need and increase export volumes, further pressuring oversupplied markets in the region.”
“We expect recent gains in margins will likely ease as a result of softened demand growth amid headwinds from China, with the Asian benchmark Singapore complex refining margin averaging a healthy USD 7.0-7.5 per barrel in 2016,” says Vikas Halan, a Moody’s vice president and senior credit officer.
This follows Moody’s expectation of a USD 1.5 per barrel year-on-year improvement in the Asia benchmark in 2015, as the sharp decline in crude oil prices and petroleum product prices pushed buyers to build refined product inventory.
Moody’s conclusions are contained in its annual outlook report for the Asian refining and marketing sector, entitled “Refining and Marketing – Asia: Outlook Stable on Modest EBITDA Growth, Easing Supply Overhang”, co-authored by Chua and Halan.