Asian Diesel Refining Margin Hits Record High of $87 Per Barrel

On the 16th, the refining margin for 10ppm sulfur diesel (the profit from selling diesel produced by refining crude oil) in Asia exceeded $87 per barrel, marking an all-time high. According to data from financial information provider LSEG, this surpasses the previous record of $85.6 per barrel set in March. The refining margin is a gauge of profitability when producing and selling diesel from refined crude.

The development warrants attention as refiners' diesel sales profits grow significantly while consumers may face a heavier fuel cost burden. Changes in international petroleum product prices are typically reflected in domestic prices with a two-to-three-week lag. According to Opinet, the Korea National Oil Corporation's price information system, the average nationwide retail price of regular gasoline at gas stations stood at 1,858.57 won per liter on the 15th, while automotive diesel was at 1,843.92 won. The gap between the two fuels was a mere 14.65 won. In the second week of September as well, gasoline stood at 1,859.1 won and diesel at 1,844.0 won, with a difference of just 15.1 won.

Behind the latest surge are global supply disruptions at refining facilities. In Russia, Ukrainian drone attacks have led to the continued shutdown of key refining facilities. Half of Russia's six major diesel-producing refineries—three of them—have significantly cut output or suspended operations this month. In the United States, diesel inventories are 13% lower than the same period last year, supporting price strength.

Meanwhile, the government's oil price cap system is acting as a variable limiting the pace of increases. The currently enforced ninth oil price cap sets the ceiling at 1,784 won per liter for gasoline and 1,773 won for diesel, based on refiners' supply prices. The government is also maintaining fuel tax cuts until the 30th. The current fuel tax stands at 698 won per liter for gasoline and 436 won for diesel.