Moody's Investors Service on Friday said the outlook for the Asian refining and marketing industry is stable, with healthy demand for refined oil products driving an increase in output and supporting refining margins.The American ratings agency said, in a release, that "Asian refining and marketing outlook remains stable and low oil prices and easing capacity overhang will keep margins healthy", as it released its latest report "Refining and Marketing - Asia: 2016 Outlook - Modest EBITDA Growth and Easing Capacity Overhang Support Stable Outlook"."Industry's EBITDA (earnings before interest, taxes, depreciation and amortisation) will grow by around 1 percent-3 percent through 2016, driven by healthy petroleum product demand and stable refining margins," Moody's said.
The report said Asian refining margin will stay healthy at $7-$7.5 per barrel, as lower oil and petroleum product prices push buyers to build refined product inventory, thereby boosting demand."We expect recent gains in margins will likely ease as a result of softened demand growth amid headwinds from China, with the Asian benchmark Singapore complex refining margin averaging a healthy $7.0-$7.5 per barrel in 2016," said Moody's vice president Vikas Halan.This follows Moody's expectation of a $1.5 per barrel year-on-year improvement in the Asia benchmark in 2015, as the sharp decline in oil prices and petroleum product prices pushed buyers to build refined product inventory.
"Capacity overhang will ease, helped by refinery closures in Japan, China and Taiwan. We expect demand growth, albeit weakening, to match or marginally exceed capacity additions," it said.Regarding India, Moody's said demand growth will pick up to 5-6 percent as the domestic economy improves."But growing demand in India will not fully offset slowing growth in China," the report cautioned.India state-run oil marketers Indian Oil IOC, Bharat Petroleum and Hindustan Petroleum reduced their debt levels in the past 12 months.Instead, "regional refiners recorded a significant inventory valuation loss when oil prices collapsed in 2014 and declined further through 2015", said Moody's.