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Asia Oil and Petrochemicals
Refining margin edged up
Refining and Petrochemical Update
Refining margin edged up. Singapore gross refining margin edged up 5%
WoW to US$9.2/bbl, driven by gasoline and naphtha spreads. Middle
distillates spreads remain strong and are above US$20/bbl. YTD GRM of
US$7.6/bbl is well ahead of last year’s US$5 average and our 2011E forecast
of US$6.7/bbl.
Petrochemical spreads remain largely unchanged from a week earlier.
The one significant mover was PX spread which, despite supply disruption
from Japan, saw a 9% correction following softer cotton prices. However, PX
spread is still more than double last year’s average and hovers above
US$700 per ton.
Country-specific developments and views
Thailand: Optimism remains elevated for Thai downstream names. Quarterly
earnings optimism, M&A related speculation and changes to Korean product
pricing have all lifted sentiment. Following the strong price performance by
Esso Thailand our preference lies with Thai Oil, PTT Aromatics and parent
company PTT.
Korea: Due to the unexpected price cut announced by SK Innovation, we
expect negative sentiment to prolong in Korean oil refining space. While we
like oil refining market outlook, we believe S-Oil to be a relative pick among
Korean oil refiners given its dividends, PX capacity expansion, and least
exposure to price cut. For petrochemical space, Honam Petrochemical is our
top pick, and expect 1Q11 earnings announcement to trigger series of
earnings upgrade.
India: The Indian upstream regulator completed NELP IX, the latest round of
E&P block auctions early last week. Out of the 34 blocks on offer (8
deepwater, 7 shallow water, rest onland), 33 blocks were auctioned through a
bidding process which received total 74 bids from multiple players. With large
international firms choosing to mostly stay away, ONGC was the provisional
winner for 13 (2 alone, rest consortiums), Oil India for 10 (all consortiums),
and RIL for 2 blocks (alone). A 7-year tax holiday shall not be available for oil
production now; and we expect that to be one of the prime reasons for a
muted response, along with 15 of the blocks being recycled ones, and the
recent confusion regarding the Cairn India-Vedanta group deal.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia Oil and Petrochemicals
Refining margin edged up
Refining and Petrochemical Update
Refining margin edged up. Singapore gross refining margin edged up 5%
WoW to US$9.2/bbl, driven by gasoline and naphtha spreads. Middle
distillates spreads remain strong and are above US$20/bbl. YTD GRM of
US$7.6/bbl is well ahead of last year’s US$5 average and our 2011E forecast
of US$6.7/bbl.
Petrochemical spreads remain largely unchanged from a week earlier.
The one significant mover was PX spread which, despite supply disruption
from Japan, saw a 9% correction following softer cotton prices. However, PX
spread is still more than double last year’s average and hovers above
US$700 per ton.
Country-specific developments and views
Thailand: Optimism remains elevated for Thai downstream names. Quarterly
earnings optimism, M&A related speculation and changes to Korean product
pricing have all lifted sentiment. Following the strong price performance by
Esso Thailand our preference lies with Thai Oil, PTT Aromatics and parent
company PTT.
Korea: Due to the unexpected price cut announced by SK Innovation, we
expect negative sentiment to prolong in Korean oil refining space. While we
like oil refining market outlook, we believe S-Oil to be a relative pick among
Korean oil refiners given its dividends, PX capacity expansion, and least
exposure to price cut. For petrochemical space, Honam Petrochemical is our
top pick, and expect 1Q11 earnings announcement to trigger series of
earnings upgrade.
India: The Indian upstream regulator completed NELP IX, the latest round of
E&P block auctions early last week. Out of the 34 blocks on offer (8
deepwater, 7 shallow water, rest onland), 33 blocks were auctioned through a
bidding process which received total 74 bids from multiple players. With large
international firms choosing to mostly stay away, ONGC was the provisional
winner for 13 (2 alone, rest consortiums), Oil India for 10 (all consortiums),
and RIL for 2 blocks (alone). A 7-year tax holiday shall not be available for oil
production now; and we expect that to be one of the prime reasons for a
muted response, along with 15 of the blocks being recycled ones, and the
recent confusion regarding the Cairn India-Vedanta group deal.
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