Moody’s: Outlook for Asian oil refining, marketing sector stable on steady earnings growth

KUALA LUMPUR: The outlook for the Asian oil refining and marketing (R&M) sector is stable, with the earnings before interest, tax, depreciation and amortisation (EBITDA) of rated companies growing a modest five per cent through 2018, said Moody’s Investors Service.

Moody’s assistant vice president and analyst, Rachel Chua said this was driven by China and India’s appetite for petroleum products and continued capacity rationalisation, hence, the belief that refining margins would remain firm, thereby supporting the growth in earnings.

“Specifically, we expect the average Asian refining margins to be largely in line with the average of US$6.2 per barrel for the last three years, but better than US$5.1 per barrel in 2016,” she added, in a statement yesterday.

She said the recent forced closure of about a quarter of US refining capacity had created an undersupply situation, causing fuel prices, including gasoline, diesel and jet fuel, to surge.

“Nonetheless, we expect the recent spike in crack spreads and refining margins to temper and normalise as the supply crunch eases gradually,” said Chua.

Moody’s conclusions are contained in its just-released report, “Refining and marketing – Asia, Outlook stable on modest EBITDA growth and firm refining margins”.

This outlook reflects Moody’s expectations for the fundamental business conditions in the sector over the next 12-18 months and has been stable since October 2014, when its outlook opinion was initiated.

According to Moody’s, supply and demand will vary by country, but for the region as a whole, incremental growth in demand for fuel of around 0.7 million barrels per day (bpd) will outpace net refining capacity additions of 0.4-0.5 million bpd over the next 12 to 18 months.