UBS: Asia Oil Explorer- Asia refining margins hit 21-month high

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UBS Investment Research
Asia Oil Explorer
Asia refining margins hit 21-month high
􀂄 Gasoline and diesel spreads up US$1.3/bbl and US$1.5/bbl, respectively
The Reuters Singapore complex refining margin index averaged US$6.8/bbl last
week, up from US$6.4/bbl the previous week. Gasoline and diesel spreads versus
Dubai were up US$1.3/bbl and US$1.5/bbl, respectively WoW. Fuel oil spread, on
the other hand, declined US$2.5/bbl WoW. PX spread (to naphtha) rose 12.0% to
close at US$511/t, while benzene-naphtha fell 6.3% to US$156/t.

􀂄 US crude stocks decline, products increase on refining push
WTI crude oil prices fell 1.6%, ending last week at US$87.8/bbl, while Brent
prices fell 1.1%, ending last week at US$90.2/bbl. Oil prices weakened on
concerns that China’s move of raising reserve requirements to control inflation will
curb oil demand. According to the US Department of Energy (DOE) for the week
ended 3 December, crude inventories fell 3.8mbbls. Higher refinery utilisation led
to lower crude stocks and higher products inventories. US gasoline and distillate
stocks rose 3.8mbbls and 2.2mbbls, respectively, but Singapore middle distillate
stocks sank to a 25-week low due to the aggressive buying spree by trading firm
Mercuria.

􀂄 Refining stocks have outperformed in the past month
For the month ended 10 December and based on simple average performance,
refining stocks in Asia under UBS coverage rose 1.3%, while, on an average,
integrated stocks fell 5.0% and E&P stocks remained flat.

􀂄 Top picks
Our Most Preferred stocks in Asia are PetroChina, S-Oil, Thai Oil, Essar Oil, and
Formosa Chemicals & Fibre.