Oil investors are concerned about supplies due to booming U.S. output and uncertainty over how OPEC and its allies will implement production cuts may have reason to worry about demand as well.
A look at refining profits in Asia shows consumption may not be keeping with supplies in the world’s top oil-consuming and importing region. Even as countries such as China, South Korea and Japan gear up for lower temperatures during the year-end winter season when demand for fuels such as diesel typically peak, processing gains from turning crude into the heating oil is at the lowest level in at least eight months.
A Bloomberg report on Wednesdy says Asian gasoil refining profits slump 35% ahead of winter season in the top oil consuming nations of Asia and elsewhere. The report further says returns from processing at sophisticated plants are currently at 5-year low, a worrisome development for oil producers.
It would be recalled that increased efficiency and output of the US oil shales have combined to boost global oil supply which dragged down oil prices in the last couple of months, forcing OPEC member countries to consider another oil production cut to rebalance the global oil market.