rongsheng refinery start up quotation

SINGAPORE, Oct 14 (Reuters) - Rongsheng Petrochemical, the trading arm of Chinese private refiner Zhejiang Petrochemical, has bought at least 5 million barrels of crude for delivery in December and January next year in preparation for starting a new crude unit by year-end, five trade sources said on Wednesday.

Rongsheng bought at least 3.5 million barrels of Upper Zakum crude from the United Arab Emirates and 1.5 million barrels of al-Shaheen crude from Qatar via a tender that closed on Tuesday, the sources said.

Rongsheng’s purchase helped absorbed some of the unsold supplies from last month as the company did not purchase any spot crude in past two months, the sources said.

Zhejiang Petrochemical plans to start trial runs at one of two new crude distillation units (CDUs) in the second phase of its refinery-petrochemical complex in east China’s Zhoushan by the end of this year, a company official told Reuters. Each CDU has a capacity of 200,000 barrels per day (bpd).

Zhejiang Petrochemical started up the first phase of its complex which includes a 400,000-bpd refinery and a 1.2 million tonne-per-year ethylene plant at the end of 2019. (Reporting by Florence Tan and Chen Aizhu, editing by Louise Heavens and Christian Schmollinger)

The company, 51% owned by private chemical group Zhejiang Rongsheng Holdings, said it has started test production at ethylene, aromatics and other downstream facilities, without giving further details.

Zhejiang Petrochemical started a first 200,000 barrels per day (bpd) crude processing unit in late May, following on from the start of a 400,000-bpd refinery owned by another private chemical major Hengli Petrochemical.

The newly started units at Zhejiang Petrochemical should include a second 200,000-bpd crude unit, a 1.2 million tonnes per year (tpy) ethylene unit and a 2 million tpy paraxylene unit, according to several industry sources with knowledge of the plant"s operations.

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The changing roles played by China’s independent refineries are reflected in their relations with Middle East suppliers. In the battle to ensure their profitability and very survival, smaller Chinese teapots have adopted various measures, including sopping up steeply discounted oil from Iran. Meanwhile, Middle East suppliers, notably Saudi Aramco, are seeking to lock in Chinese crude demand while pursuing new opportunities for further investments in integrated downstream projects led by both private and state-owned companies.

Four years later, the NDRC adopted a different approach, awarding licenses and quotas to teapot refiners to import crude oil and granting approval to export refined products in exchange for reducing excess capacity, either upgrading or removing outdated facilities, and building oil storage facilities.[10] But this partial liberalization of the refining sector did not go exactly according to plan. Swelling with new sources of feedstock that catapulted China into the position of the world’s largest oil importer, teapots increased their production of refined fuels and, benefiting from greater processing flexibility and low labor costs undercut larger state rivals and doubled their market share.[11]

2021 marked the start of the central government’s latest effort to consolidate and tighten supervision over the refining sector and to cap China’s overall refining capacity.[14] Besides imposing a hefty tax on imports of blending fuels, Beijing has instituted stricter tax and environmental enforcement[15] measures including: performing refinery audits and inspections;[16] conducting investigations of alleged irregular activities such as tax evasion and illegal resale of crude oil imports;[17] and imposing tighter quotas for oil product exports as China’s decarbonization efforts advance.[18]

The politics surrounding this new class of greenfield mega-refineries is important, as is their geographical distribution. Beijing’s reform strategy is focused on reducing the country’s petrochemical imports and growing its high value-added chemical business while capping crude processing capacity. The push by Beijing in this direction has been conducive to the development of privately-led mega refining and petrochemical projects, which local officials have welcomed and staunchly supported.[20]

Yet, of the three most recent major additions to China’s greenfield refinery landscape, none are in Shandong province, home to a little over half the country’s independent refining capacity. Hengli’s Changxing integrated petrochemical complex is situated in Liaoning, Zhejiang’s (ZPC) Zhoushan facility in Zhejiang, and Shenghong’s Lianyungang plant in Jiangsu.[21]

As China’s independent oil refining hub, Shandong is the bellwether for the rationalization of the country’s refinery sector. Over the years, Shandong’s teapots benefited from favorable policies such as access to cheap land and support from a local government that grew reliant on the industry for jobs and contributions to economic growth.[22] For this reason, Shandong officials had resisted strictly implementing Beijing’s directives to cull teapot refiners and turned a blind eye to practices that ensured their survival.

But with the start-up of advanced liquids-to-chemicals complexes in neighboring provinces, Shandong’s competitiveness has diminished.[23] And with pressure mounting to find new drivers for the provincial economy, Shandong officials have put in play a plan aimed at shuttering smaller capacity plants and thus clearing the way for a large-scale private sector-led refining and petrochemical complex on Yulong Island, whose construction is well underway.[24] They have also been developing compensation and worker relocation packages to cushion the impact of planned plant closures, while obtaining letters of guarantee from independent refiners pledging that they will neither resell their crude import quotas nor try to purchase such allocations.[25]

To be sure, the number of Shandong’s independent refiners is shrinking and their composition within the province and across the country is changing — with some smaller-scale units facing closure and others (e.g., Shandong Haike Group, Shandong Shouguang Luqing Petrochemical Corp, and Shandong Chambroad Group) pursuing efforts to diversify their sources of revenue by moving up the value chain. But make no mistake: China’s teapots still account for a third of China’s total refining capacity and a fifth of the country’s crude oil imports. They continue to employ creative defensive measures in the face of government and market pressures, have partnered with state-owned companies, and are deeply integrated with crucial industries downstream.[26] They are consummate survivors in a key sector that continues to evolve — and they remain too important to be driven out of the domestic market or allowed to fail.

In 2016, during the period of frenzied post-licensing crude oil importing by Chinese independents, Saudi Arabia began targeting teapots on the spot market, as did Kuwait. Iran also joined the fray, with the National Iranian Oil Company (NIOC) operating through an independent trader Trafigura to sell cargoes to Chinese independents.[27] Since then, the coming online of major new greenfield refineries such as Rongsheng ZPC and Hengli Changxing, and Shenghong, which are designed to operate using medium-sour crude, have led Middle East producers to pursue long-term supply contracts with private Chinese refiners. In 2021, the combined share of crude shipments from Saudi Arabia, UAE, Oman, and Kuwait to China’s independent refiners accounted for 32.5%, an increase of more than 8% over the previous year.[28] This is a trend that Beijing seems intent on supporting, as some bigger, more sophisticated private refiners whose business strategy aligns with President Xi’s vision have started to receive tax benefits or permissions to import larger volumes of crude directly from major producers such as Saudi Arabia.[29]

The shift in Saudi Aramco’s market strategy to focus on customer diversification has paid off in the form of valuable supply relationships with Chinese independents. And Aramco’s efforts to expand its presence in the Chinese refining market and lock in demand have dovetailed neatly with the development of China’s new greenfield refineries.[30] Over the past several years, Aramco has collaborated with both state-owned and independent refiners to develop integrated liquids-to-chemicals complexes in China. In 2018, following on the heels of an oil supply agreement, Aramco purchased a 9% stake in ZPC’s Zhoushan integrated refinery. In March of this year, Saudi Aramco and its joint venture partners, NORINCO Group and Panjin Sincen, made a final investment decision (FID) to develop a major liquids-to-chemicals facility in northeast China.[31] Also in March, Aramco and state-owned Sinopec agreed to conduct a feasibility study aimed at assessing capacity expansion of the Fujian Refining and Petrochemical Co. Ltd.’s integrated refining and chemical production complex.[32]

Commenting on the rationale for these undertakings, Mohammed Al Qahtani, Aramco’s Senior Vice-President of Downstream, stated: “China is a cornerstone of our downstream expansion strategy in Asia and an increasingly significant driver of global chemical demand.”[33] But what Al Qahtani did notsay is that the ties forged between Aramco and Chinese leading teapots (e.g., Shandong Chambroad Petrochemicals) and new liquids-to-chemicals complexes have been instrumental in Saudi Arabia regaining its position as China’s top crude oil supplier in the battle for market share with Russia.[34] Just a few short years ago, independents’ crude purchases had helped Russia gain market share at the expense of Saudi Arabia, accelerating the two exporters’ diverging fortunes in China. In fact, between 2010 and 2015, independent refiners’ imports of Eastern Siberia Pacific Ocean (ESPO) blend accounted for 92% of the growth in Russian crude deliveries to China.[35] But since then, China’s new generation of independents have played a significant role in Saudi Arabia clawing back market share and, with Beijing’s assent, have fortified their supply relationship with the Kingdom.

Smaller Chinese independents have been less fortunate, hit hard not just by tougher domestic regulation but by soaring crude oil prices.[36] US-led sanctions flowing from the war in Ukraine have compounded the pressure on teapots, which prior to the conflict had sourced about a fifth of their crude oil from Russia. Soaring oil tanker freight rates and the refusal of Chinese banks to issue letters of credit for Russian crude have choked off much of this supply, though some private refiners have compensated by using cash transfers to pay for Russian ESPO blend crude.[37]

Meanwhile, though, enticed by discounted prices Chinese independents in Shandong province have continued to scoop up sanctioned Iranian oil, especially as their domestic refining margins have thinned due to tight regulatory scrutiny. In fact, throughout the period in which Iran has been under nuclear-related sanctions, Chinese teapots have been a key outlet for Iranian oil, which they reportedly unload from reflagged vessels representing themselves as selling oil from Oman and Malaysia.[38] China Concord Petroleum Company (CCPC), a Chinese logistics firm, remained a pivotal player in the supply of sanctioned oil from Iran, even after it was blacklisted by Washington in 2019.[39] Although Chinese state refiners shun Iranian oil, at least publicly, because of US sanctions, private refiners have never stopped buying Iranian crude.[40] And in recent months, teapots have been at the forefront of the Chinese surge in crude oil imports from Iran.[41]

As Chinese private refiners’ number, size, and level of sophistication has changed, so too have their roles not just in the domestic petroleum market but in their relations with Middle East suppliers. Beijing’s import licensing and quota policies have enabled some teapot refiners to maintain profitability and others to thrive by sourcing crude oil from the Middle East. For their part, Gulf producers have found Chinese teapots to be valuable customers in the spot market in the battle for market share and, especially in the case of Aramco, in the effort to capture the growth of the Chinese domestic petrochemicals market as it expands.

A dramatic drop in Chinese import quotas looks to have dashed hopes that a pair of major refinery expansions there would boost the country’s oil demand in the second half of the year. The Zhejiang Petrochemical refinery, which would rank among the world’s biggest, is about to reach full completion on the second 400,000 barrel per day phase expansion of the 800,000 b/d complex, but the facility will likely have to slow crude purchases to comply with newly issued import quotas. The Zhejiang plant, commonly known as the Rongsheng refinery after the name of its majority shareholder, has been an important Chinese buyer of spot crude, especially in recent months. China’s newest refinery, the 320,000 b/d Shenghong facility has also yet to receive any crude import quotas despite plans to begin trial runs at the end of August. Together, the pair make up the bulk of 893,000 b/d of Asian refining expansions starting up this year. Unless China approves a third round of import quotas, the anticipated jump in crude demand from the two Chinese plants is likely to be significantly blunted (PIW Jan.8"21). China’s Ministry of Commerce (Mofcom) slashed Rongsheng’s second round import quotas by 69% compared to last year, bringing its total quotas this year to 124.61 million barrels, according to Chinese consultancy JLC. Rongsheng’s 400,000 b/d first phase alone needs 146 million bbl of crude for the year, leaving it 21.39 million bbl of imported crude short. The second phase will need even more to reach full capacity in the second half of the year. As part of the second phase, the refinery’s third 200,000 b/d crude distillation unit (CDU) has been ramping up since last November and is believed to be operating close to full capacity, according to a Chinese refiner source. The fourth 200,000 b/d CDU is very close to completion, said two market sources. Mofcom usually issues a third round of crude import quotas, but sources said it remains unclear whether volumes would be sufficient or if the quotas would be released at all due to uncertainty caused by the recent government clampdown on independents. Until that happens, the currently available quotas mean that Rongsheng is likely to struggle to directly import enough crude to run its third CDU at capacity and still ramp up its fourth CDU, according to a trading analyst. For now, Rongsheng appears unlikely to be able to fully ramp up Phase 2 in the second half of the year, said a Chinese analyst. Some independent refiners have already turned to running straight fuel oil as feedstock, but given the sophistication and petrochemical focus of the Rongsheng plant, this would not likely be economical for them, said two refining sources. In the short term, this is likely to force Rongsheng to slow down its buying of spot crude unless they are extremely confident of getting more crude quotas going forward, according to a variety of market participants. And there remains considerable uncertainty over the likelihood of Rongsheng receiving a top-up of its import quotas, said the trading analyst. The effect on overall Chinese crude buying is likely to be significant. Rongsheng recently bought 10 million-12 million bbl of spot Mideast crude for late June to July loading through a tender last month, according to two traders. Meanwhile, the new Shenghong plant is unable to import any crude, forcing it to explore sourcing domestic crude for upcoming trial runs, Energy Intelligence understands. But domestic supply is tight and Shenghong faces increased competition from independent refiners that also are losing access to imported crude feedstock (PIW Jun.18"21).

State oil giant Saudi Aramco signed an agreement on Thursday to invest in a refinery-petrochemical project in eastern China, part of its strategy to expand in downstream operations globally.

The memorandum of understanding between the company and Zhejiang province included plans to invest in a new refinery and co-operate in crude oil supply, storage and trading, according to details released by the Zhoushan government after a signing ceremony in the city south of Shanghai.

Zhejiang Petrochemical, 51 percent owned by textile giant Zhejiang Rongsheng Holding Group, is building a 400,000-barrels-per-day refinery and associated petrochemical facilities that was expected to start operations by the end of this year.

Aramco also owns part of the Fujian refinery-petrochemical plant with Sinopec and Exxon Mobil Corp, and has plans to build a 300,000-bpd refinery with China’s Norinco. It is also in talks with PetroChina to invest in a refinery in Yunnan.

Chinese refiners’ appetite for Russian crude varies by their profiles. State-run refiners prefer to diversify their crude supplies, importing a large proportion of their crude from the Middle East, while supplementing with spot barrels from West Africa, Brazil, and the US, and more recently Russia. The independent integrated refiners are not prepared to risk buying Russian crude and have stuck to their usual crude suppliers.

Meanwhile, the smaller independent refiners, also called teapot refiners, are most price-sensitive and have ramped up purchases of their favoured ESPO blend crude almost immediately after Russian crude prices tumbled. Imports of ESPO blend cargos by teapot refiners in Shandong and surrounding area reached a new record in July, as Russia boosted ESPO exports whilst Chinese state-run refiners cut purchases, driving Aframax tanker rates on the Kozmino-Shandong (TD24) route to a near four-fold jump from pre-war levels.

The construction of the project includes a million-ton-level ethylene plant, as well as a 10/700,000-ton/year ethylene oxide/ethylene glycol device, a 600,000-ton/year styrene device, a 350,000-ton/year polypropylene device, and a 300,000-ton/year 9 sets of chemical plants and supporting utilities including an ethylene-vinyl acetate resin plant, a 100,000-ton/year thermoplastic elastomer plant, etc., with a total investment of 27.8 billion yuan, and an estimated annual output value of 26 billion yuan, which can stimulate the local downstream industry of over 100 billion yuan .

The restructuring and transformation project of Beihai Refining & Chemical Corporation mainly includes the newly built 1.2 million tons/year LTAG device, 30,000 standard/hour hydrogen production device, and supporting public works, storage and transportation facilities, etc.

With a total investment of 980 million yuan, the project will start construction in September 2019, will be completed in April 2021, and will be fully put into operation in August 2021. After the project is put into production, it can convert inferior diesel fuel from catalytic cracking into high-standard high-octane gasoline or light aromatics, achieving high-value utilization, while reducing production energy consumption, further optimizing the product structure, and further improving economic benefits. It can achieve an annual revenue increase of 2.7 billion yuan and an annual tax increase of 1.5 billion yuan.

11 sets of chemical equipment, including 1 million tons/year ethylene cracking unit, 100,000 tons/year EVA unit, 400,000 tons/year HDPE unit, 200,000 tons/year EO/EG unit, and 200,500 tons/year EO/EG unit. Annual PO/SM unit, 350,000 tons/year PP unit, 120,000 tons/year butadiene extraction unit, 100,000/30,000 tons/year MTBE unit/butene-1 unit, 500,000 tons/year pyrolysis gasoline Hydrogen unit, 350,000 tons/year aromatics extraction unit, 800,000 tons/year P2A unit; 2 sets of oil refining equipment, including newly built 3 million tons/year atmospheric distillation unit and 450,000 tons/year refinery dry gas Pre-refining device.

The construction content of the project includes the main project and supporting construction of the wharf project, storage and transportation project, public auxiliary project, and environmental protection project. The main project is located in the Lianyungang Petrochemical Industrial Base, Xuwei New District, Lianyungang City. It mainly includes 16 million tons/year atmospheric and vacuum distillation, 4 million tons/young hydrocarbon recovery, 1.8 million tons/year kerosene hydrogenation, 2 million tons/year delayed coking, Combined heavy oil hydrogenation (3.5 million tons/year + 3.6 million tons/year hydrocracking + 3.3 million tons/year residual oil hydrogenation), 3 million tons/year gasoline and diesel hydrogenation, 600,000 tons/year sulfur recovery, 2 ×3.2 million tons/year continuous reforming, 2.8 million tons/year p-xylene, 1.1 million tons/year ethylene, 260,000 tons/year acrylonitrile, 90,000 tons/year methyl methacrylate (MMA), 300,000 tons/year 27 sets of ethylene-vinyl acetate copolymer (EVA), integrated coal gasification combined cycle power generation (IGCC) and other 27 units per year.

In June 2021, Shandong Yulong Petrochemical Co., Ltd. Yulong Island Refining and Chemical Integration Project (Phase I) PSA unit started. The device adopts new technology to maximize the extraction of hydrogen from traditional fossil energy and hydrogen-rich gas, increase the recovery rate, reduce the consumption of raw gas, and reduce energy consumption and carbon dioxide emissions.

The new main projects mainly include 20 million tons/year oil refining, 4 million tons/year p-xylene, 1.4 million tons/year ethylene and downstream equipment, and supporting projects include storage and transportation projects, public auxiliary projects and environmental protection projects. After the completion of the project, it will have an annual production capacity of 20 million tons of oil refining, 4 million tons of p-xylene, and 1.4 million tons of ethylene. The annual output value will be 102.9 billion yuan, and the profit and tax will be 34.3 billion yuan. It will build an integrated industrial chain of "crude oil-aromatics (PX), olefins, polypropylene, polyethylene", and enhance my country"s right to speak in the ethylene and paraxylene industries.

On January 22, 2021, in order to promote the construction of the second phase of the 40 million tons/year refining and chemical integration project of Zhejiang Petrochemical Co., Ltd., a holding subsidiary of Rongsheng Petrochemical Co., Ltd., Zhejiang Petrochemical as a borrower and 10 banks The syndicate signed the "Syndicated Loan Contract", and the project syndicate agreed to provide the borrower with a medium- and long-term loan line equivalent to RMB 52.7 billion or equivalent foreign exchange.

PetroChina Guangxi Petrochemical Company’s refining and chemical integration transformation and upgrading project is located in the northern part of Qinzhou Port Industrial Zone, Qinzhou Port Economic and Technological Development Zone. The total investment is about 30 billion yuan, and the land area is about 363 hectares, including 66 hectares of the company’s existing land (existing demolition Project quantity), 297 hectares of land need to be newly acquired, and it is planned to be completed and put into production 36 months after approval.

On April 12, 2021, the China (Guangxi) Pilot Free Trade Zone Qinzhou Port area issued an announcement for consultation on the social stability risk analysis of the PetroChina Guangxi Petrochemical Company"s refining and chemical integration transformation and upgrading project.

The refinery area is located in the area west of the Longjiang estuary in the Dananhai Petrochemical Industrial Zone, Jieyang, Guangdong; the crude oil terminal reservoir is located in the Shibeishan area in the southeast of Huilai County; the crude oil terminal is located in the sea near the Shibeishan lighthouse in Jinghai Town; the refined oil terminal is located in the Longjiang River, the Dananhai The waters west of the estuary.

SINGAPORE- Middle East crude benchmarks Oman and Dubai firmed on Wednesday after Rongsheng Petrochemical snapped up spot cargoes for delivery in December and January in preparation of starting a new crude unit by the end of the year.

Rongsheng, the trading arm of Chinese private refiner Zhejiang Petrochemical, bought at least 3.5 million barrels of Upper Zakum crude from the United Arab Emirates and 1.5 million barrels of al-Shaheen crude from Qatar via a tender that closed on Tuesday, the sources said.

On Wednesday, Rongsheng was said to have bought another 2 million barrels of Oman crude from Occidental, trade sources said. It may have also purchased 1 million barrels each of Basra Light and Upper Zakum crude from PetroChina, they added. These deals could not be verified.

Rongsheng"s purchase helped absorbed some of the unsold supplies from last month as the company did not purchase any spot crude in past two months, the sources said.

Viva Energy Group Ltd said it expected its refinery business to make a loss in the third quarter and that it would make a decision on its future in December as the longer-term outlook remains highly uncertain.

Russian Energy Minister Alexander Novak said the OPEC+ group of leading oil producers will start easing output curbs as planned despite a global spike in coronavirus cases.

China ramped up oil product exports in October even as refiners elsewhere struggle to stay on their feet in what is set to be the new norm as the global refining sector faces up to unrelenting Chinese expansion and COVID-19-induced fuel demand decimation, according to industry sources and government data.

The newly-built highly-integrated mega Chinese refinery-cum-petrochemical complexes are immensely more efficient than the 50-60 year-old clunkers that they are replacing across the globe spanning from the U.S. west coast to the Philippines, bringing a new paradigm to the oil market, they said.

“We have these new refineries coming up in China that were planned 3-5 years ago but China does not need the extra capacity right now, the world also does not need it. We are going to see margins getting worse for refiners in the region and more capacity will be shut,” said one trading source.

The world’s largest crude oil importer shipped out 4.52 million mt of gasoline, diesel and jet-kerosene in October, up 73% from the 2.62 million mt exported in September, General Administration of Customs data showed. The volumes were little changed from a year ago, which were weighed by a 72% collapse in jet-kerosene shipments due to the virtual grounding of international air travel.

Yet at the same time, Chinese refiners, set to become the biggest global refining center at the expense of the U.S., cranked up runs to a record-high of 59.82 million mt, or about 14.15 million b/d, in October even as domestic demand failed to live up to expectations during the autumn holiday season.

“Chinese refineries are not intentionally built or designed to serve the overseas market in the first place, until now many refineries see the export market as their last resort, or a valve to clear up any surplus,” saidFeng Xiaonan, IHS Markit downstream analyst in Beijing.

“The reason is multi-fold, 1. They can bear lower product cracks by leveraging on the more profitable chemicals side. 2. Economies of scale. 3. High production flexibility, e.g. they can intentionally gear up their oil product yield when the market is in favor of these products and vice versa,” she said.

So far in Asia, Royal Dutch Shell announced the closure of its 60-year-old 110,000 b/d Tabangao refinery in the Philippines and plans to cut capacity by half at its biggest 500,000 b/d facility in Singapore. Shell said it aims to have just six integrated refineries by 2025.

BP Australia earlier said it would convert its 152,000 b/d Kwinana refinery in Western Australia into an import terminal. Ampol said Oct. 8 it is studying a similar conversion of its 109,000 b/d Lytton site, echoing a statement by Refining NZ, the sole operator in New Zealand. The Australian government last month announced plans to subsidize refiners as long as they maintain operations in Australia, days after Viva said it may shut the 120,000 b/d Geelong site.

One of the export quota recipient, Zhejiang Petrochemical Corp. (ZPC) was given 1 million mt. The company, which is majority owned by Rongsheng Petrochemical Co., is in the final stages of getting the second phase of its 800,000 b/d refinery up and running.

“One million mt for use in one month is a lot, most of this will end up as gasoline and that will have an impact on the market. We may have to brace for more such news next year,” the trading source said.

Drug makers Pfizer and BioNTech said on Monday that their vaccine was more than 90% effective in preventing COVID-19, raising hopes that the pandemic, which eroded global fuel demand, may be controlled, trading sources said. Crude oil surged on the news with ICE Brent up 6.1% on-day to $42.74/bbl as of 4:30 pm Singapore time.

"It is good news, although the requirement of very low-temperature storage could pose a logistical challenge. This could be the start of the series of new vaccinations under development. These vaccines will help accelerate the fuel demand recovery," said Premasish Das, IHS Markit research and analysis director.

Pressured by weak demand and supply overhang, the benchmark 92 RON crack on Nov. 4 fell to $2.020/bbl, the lowest since Sept. 3, according to OPIS data. It recovered to $2.654/bbl on Tuesday.

"There may be a small uplift in air travel around mid-to-late 2021, assuming travel bans, restrictive measures are lifted, as people rush to travel after being grounded for so long. But then, it will still take time before market confidence returns to 100%," said April Tan, IHS Markit downstream research associate director in Singaporean.

Demand could pick up for bunkers from cruise liners once the vaccine proves to be effective as borders open up and travelling resumes, said some bunker suppliers.

Mobility curbs delayed the commissioning of new plants while supply of propylene from refinery sources was curtailed as refiners cut runs, according to Asia Light Olefins World Analysis - Propylene.

The factors that supported olefins demand also negatively impacted sectors that consume durable goods made from aromatics, including building, construction and furniture while empty roads meant lower demand for gasoline octane boosters MX and toluene.

A bumper 10 million-barrel spot crude oil purchase by Rongsheng Petrochemical suggests it is keen to get the second phase of its massive 40 million mt/yr, or 800,000 b/d, refinery and chemical project at subsidiary Zhejiang Petrochemical Co. Ltd (ZPC) running in the coming months, trading sources said.

Rongsheng announced in August plans to begin trial runs at the second 400,000 b/d tranche of the project in the fourth quarter of 2020 and looks set to achieve this aim despite COVID-19-related construction delays due to social distancing restrictions earlier in the year.

Market participants said Rongsheng was absent from the spot market for a couple of months and returned this week to buy the medium-sour Middle East cargoes, which led some to believe it was restocking but added that the scale of the purchase does point to some use in the new facility.

The refiner bought grades including Upper Zakum, Qatar Marine, Basrah Light, Oman and Al-Shaheen, they said, adding that the cargoes were for delivery mostly in December with some going into January, they said.

The purchase is not a sign of increased crude purchases from China for the final quarter as the nation has still to work through record imports made earlier in the year with deliveries in September coming in at a high 11.8 million b/d, up 2% from 11.2 million b/d in August and well above the 10 million b/d a year ago, according to preliminary data from the General Administration of Customs (GAC).

ZPC completed hoisting several of its major refining units, including the crude distillation unit (CDU), residual hydrotreating unit and diesel hydrotreating unit by the time of this update, IHS Markit said in its Aug. 27 short-term outlook on the China crude market.

"Under normal conditions it would take at least another 4-6 months before they can get the entire plant ready for normal operation, but we can"t exclude the possibility that they may choose to partially startup Phase II in order to meet their stated goal of a 2020 Q4 startup," Feng said on Friday.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Continuing low refinery runs coupled with the autumnal turnaround season has tightened supplies from across the European barrel since September, creating backwardation in naphtha and gasoline and causing middle distillate differentials to strengthen versus distillate futures, according to OPIS and Intercontinental Exchange pricing.

"The argument is that we are facing a very cold winter, and Japan will need to buy kerosene and refiners have cut production back. China"s domestic aviation market has also bounced back. But I don"t buy it myself because Japan"s tanks are full, and the long haul (flights) sector is still suffering," one trader said. "There was also talk of jet fuel being blended into marine gasoil pools to help support the market."

At the start of September, the November regrade was trading at minus $5.10/bbl, with Singapore FOB jet paper trading the equivalent of around $18.50/mt below Singapore FOB 10ppm sulfur gasoil paper. By the end of the month, the November regrade had bounced higher to minus $3.08/bbl, while FOB jet paper narrowed to just $5/mt below Singapore FOB 10ppm sulfur gasoil, a contraction of $13.50/mt over the month.

But the volatility and liquidity of jet paper raises uncertainty over whether the rally in both the Asian regrade and European paper will hold over the winter. Trading was very thin for Q4 and Q1 jet paper to begin with, although it has started to recover, according to jet fuel traders.

"I am happy to see the differentials higher, but what struck me as odd was the recovery was the recovery was much greater in Q4 and Q1 than next summer," said a refining source. "The whole of the curve has moved up, but if the aviation market is recovering then I would expected to have seen Q2 and Q3 swaps rally as much as if not more than Q4 and Q1, [which is the period] when demand falls off and when there is still no vaccine."

Differentials for jet fuel cargoes arriving into Europe typically trade at a premium of between $20 and $40/mt above distillate futures and have soared to above $80/mt when the market is short of supply. But the forward pricing curve for jet fuel prices collapsed after COVID-19 struck, as the pandemic grounded aircraft while countries went into lockdown to halt the spread of the virus.

Indian refiners are cranking up runs strongly on the back of robust domestic gasoline demand and signs of a recovery in diesel consumption amid speculation that crude throughput may even reach 100% in December, trading sources with knowledge of the matter said.

Refinery runs at the world"s third largest crude oil importer are forecast to increase to 90% in November from around 80-85% in October with further hikes anticipated in December, with one source adding that it could reach 100% due to the combination of renewed diesel and strong gasoline demand.

"Gasoline demand is super high and diesel demand is showing some signs of recovery," one India-based source said, adding that the rebound in diesel consumption has allowed refiners to crank up runs which were earlier hamstrung by limited middle distillate demand.

"Gasoline recovery has been strong and will receive a modest boost from seasonal demand due to the festive seasons. For diesel, the IHS Markit September Manufacturing PMI was 56.8 (4.8 points higher than August), indicating that industrial activities are recovering well, supporting diesel demand," said Kendrick Wee, IHS Markit research and analysis associate director in Singapore.

Diesel sales were down 7% on-year but up 22% from August, which they said portends to possibly flat growth in October and even year-on-year gains by November.

India reduced refinery throughput in August to 16.1 million mt, or 3.82 million b/d, down a hefty 26.4% from a year ago, according to data from the Petroleum Planning & Analysis Cell (PPAC). This works out to 76% of the country"s nameplate 5.02 million b/d capacity and 73.6% of the 5.19 million b/d processed a year ago, the data showed.

Crude oil imports reached 15.2 million mt, around 3.58 million b/d, in August, down 23.4% from a year ago but up by an almost similar margin from July, PPAC data showed. Intake was also the highest since April.

There are no major refinery turnarounds planned in the fourth quarter aside from the month-long shutdown of the 400,000 b/d Vadinar facility in October.

Consequently, if runs are cranked up to full in December, crude oil trades will increase significantly from this month. Already there were signs of increased runs as purchases of November-delivery barrels rose, trading sources said.

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Asia jet fuel crack showed signs of strengthening in recent weeks, albeit still in the negative. Refining margins was at minus $0.05/bbl at the end of last week, up from minus $2.28/bbl on Aug. 31, which was the lowest point in more than three months.

Colder weather over the peak gas demand season of winter could also boost Japan’s LNG demand and offset some of the COVID-19 negative impact on demand for the super chilled fuel this year, traders said.

But the latest colder weather forecast may have already started to turn the tide, a Japanese trader said, citing the emergence of three Japanese utilities in the spot market last week for October and November cargoes.

Egypt"s Middle East Oil Refinery (MIDOR) company, located in Alexandria, has issued a tender to buy 90,000 metric tons of gasoil for October and November delivered into El Dekheila Port, according to a document seen by OPIS amid better-than-expected recovery in the region.

"We started to see some recovery in July/August and recent tenders from MIDOR and Egyptian General Petroleum Corporation (EGPC) are reflecting the recovery, but demand is still lower than last year at this time," said Farrah Boularas, an associate director with IHS Markit Downstream.

MIDOR delivers refined products to the national oil company, EGPC, and the local market. Its refinery has a crude distillation capacity of 100,000 b/d and is one of the newest and most sophisticated of Egypt"s nine operating refineries, according to IHS Markit data. Egypt has a total atmospheric distillation capacity of 737,000 b/d.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

The shutdown of the petchems facility in Scotland is planned to last between five and six weeks, those local sources say, and has been pushed back from a provisional mid-September start date.

Turnarounds at the nearby 210,000-b/d Petronineos-operated refinery and the petchem plant were originally scheduled for April this year, but the onset of the COVID-19 pandemic scotched those plans.

One source told OPIS that a short period of maintenance work on a 110,000-b/d crude distillation unit at the refinery was about to end, and so many workers engaged in that project will be redeployed to work on the forthcoming petchems plant shutdown.

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"Basically there is still a lot of inventory to be cleared up, gasoil is still worrisome considering its half of production and gasoline as well. However, there are some chances to increase runs in November. The festival season calls for it," said one refining source based in India.

India, the second-largest crude oil importer in Asia, reduced refinery throughput in August to 16.1 million mt, or 3.82 million b/d, down a hefty 26.4% from a year ago, according to data from the Petroleum Planning & Analysis Cell (PPAC). This works out to 76% of the country"s nameplate 5.02 million b/d capacity and 73.6% of the 5.19 b/d processed a year ago, the data showed.

Crude oil imports reached 15.2 million mt, around 3.58 million b/d, in August, down 23.4% from a year ago but up by an almost similar margin from July, PPAC data showed. Intake was also the highest since April.

Diesel sales by Indian Oil Corp. (IOC), Bharat Petroleum Corp. Ltd. (BPCL) and Hindustan Petroleum Corp. Ltd. (HPCL) edged up 19.7% from 1H August to 2.13 million mt, while gasoline and jet fuel rose 7.2% and 21.3% to 965,000 mt and 125,000 mt, respectively, according to data from the suppliers.

"We expect the demand recovery to continue and that would support higher refinery runs in October/November. However, from a year-on-year point of view, there is still a long a way to go to reach the 2019 level," said Premasish Das, IHS Markit research and analysis director.

IHS Markit estimates September refinery runs at 4.1 million b/d, rising to 4.4 million b/d in October/November, Das said, adding that the forecast may be slightly on the optimistic side.

However, the unrelenting spread of COVID-19 cases has cast a cloud over the upcoming festivities and some are questioning if expectations of exuberance and the accompanying surge in fuel consumption may be over stated especially as attendances at newly re-opened schools were poor, according to a Press Trust of India report.

Major Indian refiners such as IOC and Reliance Industries have in the past month restarted large facilities at Panipat and Jamnagar, respectively, which should raise crude throughput going forward, the sources said.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

An OPEC+ move to extend the compensation period for nations that failed to fulfill output cuts to end-December suggest that the UAE, one of the bigger violator, is likely to stretch already announced crude oil supply reductions in October and November into December, trading sources said.

UAE Energy Minister Suhail Al Mazroui said the over production was due to peak summer power demand and announced in a Sept. 1 tweet of supply cuts. The Adnoc announcement, combined with stricter compliance and compensation by Iraq, has in recent days bolstered Middle East crude oil prices, the sources said.

Murban, the UAE"s single-largest crude blend, was last estimated at around $0.20/bbl above its OSP compared with a discount of about $0.70/bbl last month, the source said, adding that some of the gains were also due to the deep cuts made in the latest round of OSP announcements. Upper Zakum, another big export grade, was at around plus $0.10/bbl versus minus $0.70/bbl a month ago.

The price bump were triggered by the cut to supplies which caused an initial knee-jerk buy reaction that reverberated across the various spot traded crude oil markets in the region leading to higher flat prices and firmer time spreads.

On the other hand, Basrah crude from Iraq has been losing ground in anticipation of increased supply for November after the country managed to claw back a significant portion of its over production in August and now in September, the sources said.

In its statement on Thursday following a Joint Ministerial Monitoring Committee (JMMC) meeting under the leadership of the Saudi and Russia oil ministers, the group said that the monthly report prepared by its Joint Technical Committee (JTC) showed overall compliance by participating OPEC and non-OPEC countries at 102% in August 2020, including Mexico as per the secondary sources.

However, it said the group was looking closely at market developments particularly as new cases of COVID-19 spread in many countries affecting fuel demand. In its monthly report, OPEC downgraded global oil demand further by 400,000 b/d, now contracting by 9.5 million b/d to 90.2 million b/d.

The need for better compliance and compensation was driven hard by the Saudi oil minister who warned nations against over producing and then making up for their indiscretions in a news briefing after the meeting, according to several media reports.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Saudi Aramco reduced its October liquefied petroleum gas (LPG) term supplies, on a voluntary basis, amid regional demand lulls after keeping allocations in line with nominations for two months amid higher overall term contract volumes for the full year from 2019, according to sources.

Aramco set in end-Aug. its September Contract Price (CP) for propane at $360/mt, unchanged from August and butane at $355/mt, up $10/mt on-month, as term discussions for next year got started. No cancellations of term cargoes were reported for September.

The kingdom slashed term cargoes in six of the 10 months this year, with a brief boost to eight in April and made no change for July and August, while the total reduction coming up to 21 parcels, based on OPIS record.

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A string of very larger crude carriers (VLCCs) were snapped up in the past week as traders took the opportunity of tumbling freight to replace costly time charters (TCs) made earlier at the cusp of the super contango with bookings done at up to one-fifth the price six months ago, according to ship brokers, trading sources and fixtures.

The slew of charters raised expectations of a new round of a buy-now, sell-later trading strategy, or more commonly known as a contango or storage play, but traders said the forward price curve do not yet support such a move.

According to shipping reports obtained by OPIS, 24 VLCCs have been booked on mostly three-six month TCs with one trading company having got the jump on others and managing to snap up at least four supertankers at below $30,000 per day with the cheapest at $25,000/day. The best deal on the list was for a 3+3-month booking delivered Singapore at $20,500/day, the list showed.

Included in the list are three newly-built VLCCs, the Hunter Idun, CSSC Liao Ning and the Babylon, which were laden with middle distillates in their maiden voyage and may continue to carry clean products throughout the TC period due to ample diesel and jet fuel supplies and a better contango structure, trading sources said.

"Marketing adjusted EBIT of $2 billion (H1 2019, $1 billion) reflected oil, in particular, benefiting from the volatile and structurally supportive marketing environment," Glencore said in its first-half results, adding that this allowed the company to raise full-year guidance to the top end of its long-term $2.2-$3.2 billion range.

The market condition refers to the super contango that developed after OPEC and Russia failed to agree on an output reduction agreement, leading to Middle East producers opening their oil taps and slashing prices, which coincided with the COVID-19 demand decimation to send prices tumbling at vast discounts for prompt cargoes versus forward barrels.

A similar picture emerges on the forwards, which while in contango is about one-third of that chalked in the last super cycle with the six-month spread at -$3.10/bbl for Brent, -$2.50/bbl for Dubai and -$2.80/bbl for WTI, sources said.

However, the latest increase in output from the OPEC+ group and continued lackluster demand due to a resurgence of COVID-19 cases amid fresh lockdown measures have raised the specter of another super contango, the trading sources said.

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Forecasts for the bigger cuts still held on Tuesday following unexpected news of a 30% cut by Abu Dhabi National Oil Co. in its October term loadings across all four grades in compliance with its OPEC+ obligations, according to a notice to buyers. The promise of a supply reduction temporarily boosted spot prices but it failed to change the price structure, Dubai crude remains entrenched in contango,

Naphtha usage as petrochemical feedstock was crimped by poor aromatics margins as downstream polyester and other derivative demand started to slow down in the face of the prolonged economic downturn wreaked by COVID-19. However, consumption in China for use in olefin production remains robust, a source said.

“Saudi is producing about 300,000 b/d less than their quota in August, they should have raised it by 500,000 b/d but there is a shortfall. So it also depend if Aramco wishes to use up all this slack by pumping out more in October,” another trading source said.

“For the rest of the year we do not expect so much crude imports, fresh arrivals have already started to decline. The storage economics have worsened and there are high demurrage costs,” said Sophie Fenglei Shi, downstream research associate director at IHS Markit in Beijing. OPIS is an IHS Markit company.

Demand in India will increase as two massive crude units, the Indian Oil Corp. 300,000 b/d Paradip refinery and a 380,000 b/d unit at the mega Reliance Industries Jamnagar site begin operations after around a three-week maintenance.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Chinese refiners faced excess domestic supply of transportation fuels after the economy was again disrupted by COVID-19 outbreaks in July, coupled with heavy monsoon floods in various parts of China.

Chinese refiners went on an extensive bargain hunt in spring when ICE Brent crude prices sank to as low as under $20/bbl, which ended up in record shipments in the summer that is now extended to autumn, trading sources said.

Sinopec restarted its 460,000 b/d Zhenhai Refining & Chemical Co. site in July after a four-month maintenance and its 250,000 b/d Tianjin facility after a two-month turnaround, leading to the higher output.

Naphtha buyers including Yeochon NCC (YNCC) and LG Chem paid higher premiums for their 2021 CFR term purchases than this year as the startup of a wave of new crackers in the coming months and next year shaped views of a tighter supply outlook, market participants said.

Asia naphtha demand as a petrochemical feedstock will continue to grow as new crackers begin operations even as below-capacity refinery utilization rates in some countries squeeze supply further, they said.

In addition, Lotte Chemical plans to restart its fire-hit Daesan cracker by end 2020, the company said earlier this month, adding it plans to diversify feedstocks and will more than double its use of liquefied petroleum gas (LPG) in three years.

The concluded 2021 prices, at mid-to-high single digits, also surprised to the upside because they were higher than paper values, two market sources said.

Refinery run rates in Asia and the Middle East are expected to improve to 74% this month and reach 82% by January 2021, from below 70% in April during the depth of coronavirus disease 2019 (COVID-19) lockdowns, said April Tan, IHS Markit associate director in Singapore.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with theOPIS Asia Naphtha & LPG Report.

A Royal Dutch Shell refinery in the Philippines became the first Asian casualty of the fuel demand destroying coronavirus disease 2019 (COVID-19) pandemic as other sites in the region brace themselves for similar fallouts in the face of new virus outbreaks and poor refining margins while more sites come onstream in China.

Pilipinas Shell Petroleum Corp said on Thursday that its near 60-year-old 110,000 b/d Tabangao refinery in Batangas province was no longer economically viable and would be turned into an import terminal.

“Due to the impact of the COVID-19 pandemic on the global, regional and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” Pilipinas Shell President and CEO Cesar Romero said in the statement.

Refining margins in Asia are under tremendous pressure due to the sharp drop in fuel demand with the benchmark Singapore complex gross margin dropping to minus $3.78/bbl in May/June, according to an update by Refining NZ, which is studying the possibility of converting its refinery in New Zealand to an import terminal.

“This is not a surprise. We are working on a list of refineries in Asia that are vulnerable because of COVID-19 and this refinery keeps coming up in many of the criteria,”said Premasish Das, IHS Markit downstream research and analysis director, adding that there are sites in Japan, Australia, New Zealand and even in Singapore that face uncertain futures.

“The Shell Singapore system could be supported when demand recovers next year,” said one source, adding that transportation fuels such as gasoline, jet fuel and diesel as well as bitumen will be among the products that will be shipped from the Singapore Pulau Bukom site.

The permanent shutter will open up a new market for the recently-built refineries in neighboring countries such as the Maura site in Brunei and Pengerang in southern Malaysia, which will face stiff competition from a slew of new and old plants in China, trading sources said.

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Asia gasoline is set to slump with the benchmark Singapore 92 RON crack, or refining margin, on the verge of turning negative in the face of rising supply and demand recovery losing its momentum amid new coronavirus disease 2019 (COVID-19) cases and floods in India and China, traders said.

To deal with this weakening local demand, some countries, especially China, increased exports, which exacerbated the oversupply in Asia, traders said.

Traders booked three tankers so far to lift 155,000 mt for August, after chartering 15 vessels to pick up 680,000 mt in July, according to shipping fixtures. The list also showed one tanker was booked to load 35,000 mt of gasoline and gasoil each in July and August.

RIL brought forward the turnaround of a 380,000 b/d CDU at the export-oriented 705,200 b/d Jamnagar refinery to this week from the initial schedule of Oct. 15, according to sources. The works were expected to finish in three to four weeks.

"It should not come as a surprise given that Sinopec restarted two of its biggest refineries recently," a trader with knowledge of the Chinese market said.

Sinopec restarted its 460,000 b/d Zhenhai Refining & Chemical Co. site after about a four-month maintenance and its 250,000 b/d Tianjin facility after a two-month turnaround, as reported previously.

Chinese refiners went on an extensive bargain hunt in spring when crude prices sank to as low as under $20/bbl for ICE Brent, which ended up in record shipments in the summer that is likely to be extended to the autumn, trading sources said.

However, matters took an abrupt turn when the COVID-19 cases resurfaced, followed by recent flooding in various parts of China which dragged on the economic recovery and curbed oil product demand.

U.S. refined product output capacity that has been chasing significantly weaker demand since April due to the economic fallout of coronavirus disease 2019 (COVID-19) is about to lose another refinery to temporary shutdown, market sources report.

Another market participant, citing a published report, attributed the idling to low product demand and suggested that restart of the plant would depend on an increase in that demand.

When operating at or near full capacity, the Calcasieu refinery supplies a considerable amount of heavy naphtha and low-sulfur vacuum gasoil (LSVGO) into the U.S. Gulf Coast spot market. Figures from the U.S. Energy Information Administration show the refinery as having 36,000 b/d of vacuum distillation capacity (hence the VGO output) but nothing in the way of fluid catalytic cracking (FCC) capacity or catalytic reforming capacity.

A testament to the Calcasieu refinery"s length on intermediate feedstocks is the fact that Calcasieu-quality LSVGO and Calcasieu-quality heavy naphtha were both seen on offer in the U.S. Gulf Coast spot market last week.

Other U.S. refineries shelved during the pandemic are Marathon Petroleum"s 166,000-b/d plant in Martinez, Calif., and its 28,000-b/d refinery in Gallup, N.M. (both in April). As reported by OPIS on June 16, restart of at least the Martinez refinery is not likely in 2020, according to some large unbranded wholesale customers who were privately informed by company sales executives.

Another U.S. refinery -- HollyFrontier"s 52,000-b/d refinery in Cheyenne, Wyo. -- is also soon to exit the petroleum-processing business. As previously reported, the refinery is expected to halt refining operations by Aug. 1 in order to begin the process of converting the facility to renewable diesel production by the first quarter of 2022.

But despite the EPA"s recent measurement of refiners behind the curve in 2019, counterparties in the sulfur credit trading arena have let those compliance instruments slip in value. The drops are attributable to the demand destruction that has changed the dynamic for gasoline supply balances and octane differentials across the country.

Lower refinery utilization and the COVID-inspired drop in U.S. demand have also dismissed octane worries for the moment. The best means of addressing tough Tier 3 sulfur standards this year would have required running catalytic reformers at very high rates, and that might have limited output of high- octane components. But the lowest refinery runs of the 21st century have left plenty of spare capacity in refining complexes and kept octane spreads in check.

This year may be different. Butane prices are not as cheap relative to gasoline as in prior years, so loading up motor fuel molecules with cheap high-octane normal butane doesn"t look as lucrative.

Pirate attacks on shipping have increased this year as the number of vessels chartered to store oil while anchored offshore has soared following a demand slump due to the spreading coronavirus disease 2019 (COVID-19) pandemic, according to the Allianz Group.

Incidents of piracy reported to the International Maritime Bureau (IMB) totalled 47 in the first three months of 2020, up from 38 in the same period last year,global insurance carrier Allianz Global Corporate and Specialty

In a bid to curb the spreading COVID-19 pandemic earlier this year, governments restricted population movement. The resulting economic slump and declining oil demand prompted the funnelling of crude and refined products into onshore storage facilities. As these tank farms rapidly filled up, there was a surge in the number of tankers chartered for storing excess volumes of oil. Many such tankers were anchored off the coast of major oil ports in West Africa, the U.S. and Europe, with the Gulf of Guinea becoming a hotspot for pirate attacks, according to the AGCS report.

This was supposed to be the first full driving season where E15 might flourish, thanks to the Environmental Protection Agency"s decision to approve the year-round sale of 15% ethanol blends.

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There was a time when hurricanes were the biggest disrupters to U.S. refining operations, but the coronavirus disease 2019 (COVID-19) pandemic has changed that.

U.S. refinery utilization has averaged less than 83% of capacity for 15 weeks, including a number of plants at minimum rates or idled (Marathon Petroleum"s refineries in Martinez, Calif., and Gallup, N.M).

Factors now in play for refiners include demand for gasoline that continues to trail a year ago and is showing little to no weekly improvement; still badly faltering consumption of diesel and jet fuel; strong to record-high inventories of gasoline and diesel; a patchwork of changing state government measures to contain COVID-19; and - perhaps most disruptive of all - uncertainty through at least end-2020.

Early on, when gasoline and jet demand fell more precipitously than diesel, refiners "shifted gas oil upgrading from gasoline-centric FCC [fluid catalytic cracking] units to diesel-centric hydrocrackers," said John Auers, executive vice president of Dallas-based energy consultancy Turner, Mason & Co. At the same time, refiners blended kerosene into diesel instead of into jet, he added.

Gasoline demand has been recovering for weeks, spurring optimism among refiners, only recently stalling at 10% to 15% below year-ago levels. Diesel demand is now looking better, lagging a year ago by about 6.5% and jet fuel demand is off by 52% year on year. Some gas oil upgrading has been shifted back to FCCs