Abundant Russian Supply Causes Drop In Refinery Margins

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by Tyler Durden
Tuesday, Apr 25, 2023 - 11:05 PM

By Charles Kennedy of,

Global refining margins have halved since February as Russian crude exports remain elevated despite sanctions, boosting fuel output from China and India, Reuters has reported, noting the coming boost in global refining capacity.

In March, refinery output from China and India—Russia’s biggest oil clients currently—hit a record and exports of fuels are also up.

That’s despite price caps on Russian crude oil and fuel exports aimed at curbing revenues. The caps were also widely expected to shrink Russia’s crude oil exports, thus squeezing global supply of crude oil and, consequently, fuels.

At the same time, Russia is also exporting a lot of ready fuels that are stored at oil hubs, ready for re-exporting, Reuters also noted in its report.

Refining margins are set for a further slump later in the year as well, as new refineries come online in China and the Middle East, which will further boost fuel output.

The expected refining capacity increases will also affect U.S. refiners’ margins, Reuters reported separately earlier this week. The U.S. refining industry booked a strong first quarter on robust export demand but this is about to change as competition from Asia intensifies.

"It's looking like another really strong quarter for U.S. refiners and their balance sheets are in great shape, but in the second quarter things are really starting to come down," Tudor Pickering Holt and Co. refining analyst Matthew Blair told the news agency.

China is now the leader in refining capacity, overtaking the United States last year, with 18.4 million bpd in total. This will grow further this year, cementing it at the number-one spot.

Last month, Chinese refiners booked record run rates at 14.9 million barrels daily, with the average for the first three months of the year up 5.2 percent on the first quarter of 2022.