Asia's gasoline margins are at their lowest in three years as plentiful supplies, off-peak demand and a steady rise in crude oil have undercut profit for the refined fuel. Asia's average gasoline margin or crack for Jan. 2-23 was at a $7.49-a-barrel premium to Brent crude, lowest for any January since 2015, and less than half of January 2016 levels and about two-thirds the cracks for the same month in 2017.
The weakness may be a sign of things to come. Bank of America Merrill Lynch said this week gasoline demand could peak around 2025 due to the rise of electric vehicles, meaning refining rates "may decline permanently and refining margins suffer heavily." Some industry sources expect 2018 gasoline fundamentals to improve temporarily as demand could strengthen due to the Lunar New Year holidays just as supplies start to tighten with the start of the February refinery maintenance season.
"While we forecast gasoline cracks in Asia to strengthen against Dubai in February, as a result of stronger demand, we expect gasoline to remain below 2017 cracks," said Joe Willis, senior analyst for Asia Pacific refining at energy consultancy Wood Mackenzie. Gasoline cracks can also be derived using Dubai crude values, which tend to mirror Brent.
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