US refining margins fell last week as product price losses outstripped a fall in crude prices, Platts and Turner Mason & Company data showed Tuesday. The fall in margins could lead to additional refinery run cuts and, as a result, a growth in crude inventories.
Are oil prices about to take a dive? Analyst Philip Verleger thinks so. "The oil market is teetering on the edge," Verleger said in a report. "Prices will fall sharply absent immediate and dramatic action."
Bears in the oil market had a difficult time last week, what with a soaring equities market and a sagging US dollar. The bears had low demand and high inventories on their side, but those seemed to be no match for the promise of demand recovery in the months to come.
But the bears are back this week, so far, courtesy of some fresh data out of the US Energy Information Administration, and China.
In days of yore, Asian refiners had always been able to bank on comfortable, if not cushy margins from cracking crude oil into middle distillates.
Even in early 2008, Asian refiners were enjoying record high sulfur gasoil crack spreads of more than $40/b against the Dubai crude it can be produced from, riding high from massive demand from China's stockpiling ahead of the Beijing Olympics, India's escalating domestic growth, refinery outages around the world and to fire up construction projects and transportation everywhere.
Thirty years ago, amid shocks to world oil markets that produced huge energy price spikes, policy makers began seriously to consider adopting renewable energy. Some sources, such as hydropower, geothermal and biomass, had been around for decades or more, but wind and solar power emerged only in the late 1970s as resources worth developing on a commercial scale in response to crude oil shortfalls.
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