UBS :: Asia Oil Explorer- Olefin spreads continue to decline

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UBS Investment Research
Asia Oil Explorer
O lefin spreads continue to decline
􀂄 Refining margins increase slightly
The Reuters Singapore complex refining margin index averaged US$8.5/bbl last
week, up from US$8.2/bbl the previous week. The fuel oil and diesel spread fell
US$1.6/bbl and US$2.0/bbl, respectively. The gasoline spread improved by
US$3.2/bbl. The ethylene-naphtha spread fell 6.2% WoW to US$281/t, while the
HDPE-naphtha spread fell 3.1% to close at US$266/t. The PX-naphtha spread fell
9.6% to US$506/t. The spread has fallen 39% from its peak in February 2011.
􀂄 US crude inventories surge on higher imports
The WTI crude oil prices rose 2.0%, ending last week at US$113.9/bbl, while
Brent prices rose 1.5%, ending last week at US$126.1/bbl. Crude prices were
pushed higher by a weak dollar and ongoing turmoil in North Africa and the
Middle East. Concerns about fuel demand and slowing US economic growth were
offset by a weak dollar. According to the US Department of Energy (DOE), for the
week ended 22 April, crude inventories rose 6.2mbbls against a Reuters’ consensus
of 0.8mbbls build. Crude imports rose 1.2mbpd to 9.2mbpd.
􀂄 Refining stocks have outperformed in the past month
For the month ended 2 May and based on simple average performance, refining
stocks in Asia under UBS coverage rose 1.7%, while, on an average, E&P stocks
rose 1.0% and integrated stocks remained flat.
􀂄 Top picks
Our most preferred stocks in Asia are SinoTech, Essar Oil and Thai Oil.