The year 2023 did not start as expected: China suddenly dropped all COVID restrictions, boosting sentiment in the global jet market, while diesel prices fell despite the ban on Russian oil product imports into the EU from 5 February. As a result, European jet fuel cracks jumped above diesel, but the spread narrowed by the end of February and the two products are now neck and neck, raising the question of which one will be maximised by refiners, thus tightening the supply of the other in the coming months.In this episode of the Platts Oil Markets Podcast, S&P Global Commodity Insights experts Maxim Kotenev and Gary Clark join Francesco Di Salvo to discuss the outlook for the jet fuel market, its potential impact on other middle distillates and whether a recession is likely to prevent aviation from fully recovering from the pandemic.Related price symbols: Diesel: CIF ARA 10ppm ULSD cargoes #AAVBG00 Jet fuel: CIF NWE jet fuel cargoes #PJAAU00More listening options:
The Russia-Ukraine war has dominated the attention of global commodity markets for nearly a year now. As the start date for the latest EU sanctions against Russian refined products approaches, questions about what these sanctions could mean for trade flows also grow. And while these questions often center on potential changes in US and European markets, the global impact of sanctions could also extend to other regions, such as Latin America. S&P Global Commodity Insights' Americas oil experts Anna TrierJeff Mower and Maria Jimenez Moya dive into the impacts seen from the Dec. 5 sanctions against Russian seaborne crude, and what we could expect to see in US, Europe, and Latin America markets after the Feb. 5 sanctions go into effect.Register for the Platts London Energy Forum hereMore listening options:
What will replace Russian diesel and naphtha flows to Europe after EU sanctions take effect on 5 February? Where will Russian supply go instead?In this episode of the Platts Oil Markets Podcast, S&P Global Commodity Insights editors Rowan Staden-Coats and Vinicius Maffei join Joel Hanley to discuss the expected impact of the upcoming sanctions, what uncertainties remain about replacement supply and whether Russian production will have to be cut after 5 February, and what impact this could have on global supply and prices.Related price symbols: CIF ARA 10ppm ULSD cargoes #AAVBG00 CIF NEW naphtha cargoes #PAAAL00More listening options:
Price regulation plays an important political and economic role in emerging countries, and Latin American countries this year have faced oil price volatility that has forced them to look for buffer alternatives. News experts Jeff Mower and Sheky Espejo sat down with pricing experts Maria Jimenez and Sarah Hernandez to discuss how price regulation has been applied in Colombia, Brazil and Mexico and how that has affected domestic and export refined products markets.Also check out:Platts Capitol Crude podcast More listening options:
The US Environmental Protection Agency has pitched raising the amount of renewable fuel that US refiners must mix with gasoline and diesel over the next three years. Ethanol producers generally applauded the agency's latest proposal for the Renewable Fuel Standard program, but the biodiesel sector was dismayed and accused the EPA of lowballing the renewable volume obligations for biomass-based diesel, undermining biodiesel and renewable diesel's growth potential.Kurt Kovarik, vice president of federal affairs at Clean Fuels Alliance America, which represents the biodiesel, renewable diesel and sustainable aviation fuel industries, joined the podcast to share his thoughts on the EPA's proposed RFS rule, its potential impacts on clean fuel projects in the pipeline and the likelihood that the EPA will, in his words, "course-correct," in the final rule due in June.Stick around after the interview for Starr Spencer with the Market Minute, a look at near-term oil market drivers.Related content:US EPA proposes higher biofuel blending mandates for next three yearsGroup urges US EPA to pursue ‘aggressive growth' in biodiesel as mulls new RFS mandatesMore listening options:
The future of naphtha and diesel flows after EU sanctions
Feb 02 2023
What will replace Russian diesel and naphtha flows to Europe after EU sanctions take effect on 5 February? Where will Russian supply go instead? In this episode of the Platts Oil Markets Podcast, S&P Global Commodity Insights editors Rowan Staden-Coats and Vinicius Maffei join Joel Hanley to discuss the expected impact of the upcoming sanctions, what uncertainties remain about replacement supply and whether Russian production will have to be cut after 5 February, and what impact this could have on global supply and prices. Related price symbols: CIF ARA 10ppm ULSD cargoes #AAVBG00 CIF NEW naphtha cargoes #PAAAL00 More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).
Market Movers Asia, Dec. 12-16: Easing travel restrictions in China may boost jet fuel demand
Dec 12 2022
On this week's S&P Global Commodity Insights' Market Movers Asia with Andrew Toh , Editor, Oil Futures: *China's decision to ease domestic travel restrictions may spur jet fuel demand *Kozmino to North China freight rate for Aframaxes surges *Polymer demand is expected to remain tepid *India’s iron and steel exports are set to increase
Europe set for renewed scramble for diesel barrels following Russia sanctions
Dec 09 2022
Waving goodbye to its historic symbiosis with Russia, Europe heads into 2023 facing a global tug-of-war for diesel supply. With low global diesel stocks setting supply and demand balances on edge, Europe is set to face Asia, the US, and Latin America in a battle for diesel barrels that will only add to price volatility in 2023. Global diesel stocks were playing catch-up even before Russia's invasion of Ukraine Feb. 24, emerging from the pandemic with demand having largely recovered but with immense losses to refining capacity, particularly in Europe. The Ukraine crisis sparked panic among diesel buyers, tightening the spot market and causing the steepest backwardation on record before a combination of high prices, economic weakness, a tapping of strategic reserves, and continuing consumption of the key industrial fuel restored some order. But fears of a renewed crisis simmer. Diesel and gasoil stocks in the Northwest European hub of Amsterdam-Rotterdam-Antwerp sat at 1.716 million mt, 24.9% below the five-year average late November and their lowest since 2008 for the time of year, data from Insights Global showed. Inventories elsewhere have faced a similar fate as demand outstrips supply, with diesel stocks across the Atlantic around 37% below the five-year average at the end of November and middle distillate stocks in Singapore around levels last seen in 2004 for this time of year, US Energy Information Administration and Enterprise Singapore data showed. Crisis, what crisis? Question marks remain over where Russian diesel might go -- and in what quantity -- as trade flows readjust following the start of EU import sanctions Feb. 5 that could halt 2.5 million mt of diesel, which currently continue to arrive each month. Analysts point to ongoing high prices as global arbitrage routes take time to rejig and potentially limited export destinations constrain Russian diesel production. How much this hits global balances could hinge on the global slowdown, with diesel key to industrial production. "In Europe, we expect 2023 FOB ARA diesel barge cracks to average well above the five-year range, at $43/b in first-half 2023, and $41/b in H2 2023," Rebeka Foley, an oil analyst at S&P Global Commodity Insights, said. Platts, part of S&P Global, assessed FOB ARA diesel barge cracks versus Dated Brent at $42.13/b Dec. 1, 154% above the five-year average. Bank of America's Head of Global Commodities Research Francisco Blanch was more bullish for early 2023. "Low diesel stocks, particularly in PADD 1 [US East Coast], and the risk of diesel supply disruptions from Russia point to a very tight outlook near-term, with a risk of diesel spiking to $200/b, from $150/b at present." BofA forecast European ultra low sulfur diesel cracks to average $57.50/b in the first quarter of 2023 before falling to $30 by the year's end as the economy slows, Blanch said. S&P Global's latest Oil Markets report showed cracks projected to remain above $40/b through Q4 2023 despite Western Europe's demand for diesel and gasoil contracting by 5.39 million b/d in 2023, with the biggest contraction in the third quarter at 5.52 million b/d. Russian alternatives With sanctions choking off Russian supply to EU countries, likely additional volumes will need to come from the Middle East, Asia, and the US. Sizeable arbitrage flows already come to Europe from the East of Suez, with arrivals in Europe surpassing 2 million mt in September and October, and around 1.75 million mt in November, according to shipping fixtures and Kpler data. While currently within historical ranges, flows to Europe are expected to increase when Russian supply ends as bullish price forecasts should attract high volumes of Asian barrels and more refining capacity comes online in the Middle East. Traders expect volumes from Saudi Arabia's Jazan and Kuwait's Al-Zour will help replace Russian volumes, once fully operational. The 400,000 b/d diesel-strong Jazan was initially expected to be fully operational by H2, 2020, but has faced severe delays and has not yet begun exporting diesel. The newly commissioned 615,000 b/d Al Zour refinery exported its first cargo of jet fuel Nov. 28, indicating startup of distillate units, and is expected to ramp up production through 2023. While the new capacity will eventually help offer some relief to middle distillate markets, "the bulk of this new supply will only become available quite some time after the EU ban on Russian refined products comes into force," said Warren Patterson, head of commodities strategy at ING bank said. Flows from the US Gulf Coast are also expected to step in to help plug the Russian product gap, but arbitrage economics are typically more unstable than those from East of Suez, with Europe competing with Latin America and the US Atlantic Coast via the Colonial pipeline. US Gulf Coast exports of ULSD to Europe surged 117% on the month to 484,200 mt in September, before crashing to 284,000 mt in October and rising to about 418,800 mt in November, shipping fixtures and Kpler data showed. The impact of the EU ban on refined products will depend on how quickly trade flows can adjust and whether there are willing buyers of Russian diesel and gasoil further afield, which would free up alternative supplies for the EU. "However, the quality of product and logistics could certainly complicate the necessary shift in trade flows," Patterson said, as potentially longer distances and quality requirements affect buying behavior. One thing looks clear, the European diesel market could still take some time adjusting to life without direct and immediate access to Russian barrels.
Asian gasoline cracks to come under pressure as China set to lift end-2022 outflows
Dec 02 2022
China is expected to export between 1.7 million mt (466,000 b/d) and 2 million mt (548,000 b/d) of gasoline in November and over 2 million mt in December, substantially higher compared with the 1 million mt it exported in October, analysts and market sources said Dec. 1. And should this happen, would likely exert downward pressure on regional gasoline crack spreads. Asia's largest gasoline exporter is expected to further lift its gasoline outflows by the end of 2022 in a bid to support its economy by encouraging exporters to exhaust their remaining export quotas. According to General Administration of Customs data, the country's gasoline exports stood at 662,000 mt in September, jumping 51.8% to 1 million mt in October. "Chinese oil companies will try their best to maximize the usage of their oil product export quotas, in a bid to push up the country's total goods export volumes and economy performance," said Sun Sijia, an analyst with S&P Global Commodity Insights. Beijing released 37.25 million mt of clean oil product export quotas in 2022. In January-October, China exported 23.2 million mt of gasoline, gasoil and jet fuel, the GAC data showed, leaving 14.05 million mt of quota yet to be used in November and December. "To boost exports as an economic indicator and earn more US dollars, related government authorities may work together with the refineries to facilitate and smoothen the logistics, helping the volume to hit a record high," a Beijing-based analyst said. China's domestic demand in November was weak amid tight movement restrictions, with capital city Beijing and manufacturing hubs Guangzhou, Chongqing under strict COVID control, while refining throughput was likely to hit a nine-month high. This would leave sufficient gasoline for export, market sources said. Sun said the Chinese government may alter COVID-19 restrictions frequently, resulting in an erratic impact on domestic gasoline demand. She added that people in China would continue to prefer to stay home to avoid infection and private cars remain the choice mode of transportation given rigid travel guidelines. Meanwhile, the country's estimated gasoline export volumes in 2023 remain subjected to next year's export quotas, which Chinese exporters are eagerly awaiting updates on, sources said. Expectations of China continuing to export large volumes of gasoline moving forward could possibly bolster overall gasoline supplies and exert a downward pressure on cracks, industry sources said. Several market participants also said that gasoline prices could also be weighed down by reduced demand from Malaysia following the end of the Nov. 19 general elections. However, other market participants said Malaysia's gasoline demand could be bolstered amid the school holiday period. Reflecting the softening sentiment, Platts-assessed front month FOB Singapore 92 RON gasoline swap crack spread against Brent swaps stood at 78 cents/b Dec. 1, down from $1.47/b on Nov. 30, S&P Global data showed. The physical FOB Singapore 92 RON gasoline crack against front month ICE Brent crude oil futures was assessed at $2.07/b Dec. 1, down from $3.33/b at the Asian close Nov. 30.
Global refinery closures and capacity expansions
Nov 07 2022
European sour traders look for Urals alternatives as embargo looms
Nov 04 2022
The last remaining European buyers of sour baseload crude Urals are now searching for alternatives to the Russian grade in order to fulfill contracts and ensure refinery throughput, after its Dec. 5 ban by the EU, marking a seismic shift in the European refinery slates. Kazakh crude CPC Blend has seen increasing demand as a light grade that can be easily blended with alternative sour crudes to produce a medium sour Urals alternative. One sour trader said they had purchased CPC Blend and Iraq's Basrah Medium in order to run them together to produce Urals for a term contract buyer. Kurdish Blend Test crude and CPC Blend were also being run together as Urals replacements, the trader said. Basrah Medium was heard to be flowing to Europe more in the last month, a second sour trader said, adding: "It's a substitute for Urals." Kpler shipping data supports this view with 77,000 b/d more Basrah Medium flowing to Europe in October compared with September. Some 377,000 b/d was bound for Europe in October compared with 129,000 b/d in December 2021, the last full month of voyage data before the war in Ukraine. Shipping data for KBT reveals a steadily increasingly flow of the medium sour grade toward Mediterranean refineries. In October, KBT exports to Europe soared to 359,000 b/d, up 129,000 b/d on the month, according to Kpler. "The KBT [price] is trending lower," a third sour trader said, adding that it was trying to attract Urals buyers with strong discounts. This comes as Iraqi oil marketer SOMO lowered the official selling price for all its grades in November in a surprise move to claim greater market share in Europe. "[SOMO and Saudi Aramco] have to make the prices palatable to compete with other regions like Latin American and other sour producers," another sour trader said. Turning to the North Sea, traders said there was growing expectation that Forties would be run with Johan Sverdrup as an alternative to the Urals baseload. "There's more interest in Forties as it [Urals] will be illegal in Europe in 30 days," said a North Sea trader, with a second saying it was "expected" there would be more interest in Forties in the December trading cycle. Another alternative for sour traders has come from the sweeter Libyan grade Es Sider that has caught the attention of buyers as production spikes and OSPs remain competitive. Es Sider is a sweeter grade than medium sour Urals but is often deemed too sulfurous for sweet buyers in the Mediterranean basin. "Libyan is competitive as usual and the OSP is cheap," said a Mediterranean trader, highlighting that it is attractive to buyers n the region as they looked for a cheap baseload grade. Platts, part of S&P Global Commodity Insights, last assessed Es Sider Nov.3 at a 1 cent/b discount to Dated Brent. KEBCO As European Urals purchases fade ahead of the Dec. 5 embargo, Kazakh-origin Urals (KEBCO) has risen in prominence as a Mediterranean sour marker. Platts last assessed KEBCO at a $16/b discount to Dated Brent on a CIF Augusta basis, $7.94/b higher than Russian Urals Nov. 3. "90% of Mediterranean refineries can now take KEBCO," the second sour trader said, highlighting the rise in importance of the medium sour grade. They added that it was now pricing independently of Urals as a standalone marketed grade. However, the third sour trader said some end-users were still wary of the grade as it transports through the Russian pipeline system leading to the molecules comingling. "With the Dec. 5 Embargo coming in, more and more people definitely realize they have to be cautious on these purchases," they added. Kpler shipping data reveals more buyers in the KEBCO market. In the first month of data in August, 75% of cargoes of Kazakh-origin crude went to a KMG-owned refinery in Romania, but in the most recent month of data in October that number has declined to 33% with buyers from Spain, Italy, Rotterdam and Poland joining the list of new KEBCO buyers.
LPG vs gasoil: what’s the best alternative to natural gas?
Oct 27 2022
What role will oil play in mitigating Europe's natural gas problem this winter? With energy costs skyrocketing since the start of the Russian-Ukraine war, industries and households across the continent have been looking across the barrel for practical alternatives to natural gas. In this episode of the Platts Oil Markets Podcast, S&P Global Commodity Insights associate editors Aly Blakeway and Patrick McAllister explore with Francesco Di Salvo to what degree LPG and gasoil may be used in the short-term to replace natural gas. Prices referenced in the episode: LPG: CIF ARA large propane cargoes PMABA00 LPG barges: FOB ARA propane barges PMAAS00 0.1% gasoil: FOB 0.1% gasoil barges AAYWT00 ULSD: FOB ARA 10ppm diesel barges AAJUS00 More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).
French strikes cause Europe's gasoline, diesel prices to rise as markets tighten
Oct 14 2022
The gasoline and diesel markets in Northwest Europe have tightened as France seeks alternative sources of supply due to strike at five of the country’s six refineries. Though negotiations are ongoing at ExxonMobil and TotalEnergies, and strike action might stop soon, supply disruptions are expected to continue at least for a few weeks. In this episode of the Platts Oil Markets Podcast, S&P Global Commodity Insights senior editors Virginie Malicier and Elza Turner discuss with Francesco Di Salvo why these social movements had such an impact on road fuel prices. This week's episode: It's been a perfect storm for Midwest gasoline supply Related price symbols: PCAAS00 - Dated Brent AAJUS00 - ULSD 10ppmS FOB ARA Barge ABXGT00 - ULSD 10ppm CIF NWE basis Le Havre Cargo Eur cents/liter AARIN00 - ICE LS Gasoil at London MOC Mo01 (NextGen MOC) AARIO00 - ICE LS Gasoil at London MOC Mo02 (NextGen MOC) More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).
Mixed fortunes for European feedstocks
Sep 15 2022
With the energy crisis looming over Europe, many industries fear they will have to reduce production, including petrochemical crackers. These consumers of feedstocks such as naphtha and LPG are sensitive not only to high natural gas prices but also to a lower demand outlook for plastic goods amid economic downturn and inflationary pressures. In this Oil Markets episode, S&P Global Commodity Insights editors Vinicius Maffei and Aly Blakeway explore with Francesco Di Salvo the impact of these pressures on European naphtha and LPG markets. Subscribe to Platts Dimensions Pro for access to assessments and premium content covering naphtha ( PAAAL00 ), LPG ( PMABA00 ), and much more. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).
US diesel stocks are starting off harvest season at historic lows
Sep 08 2022
Record-low stock levels in US diesel markets could signal problems for the highly liquid product. Dry weather has dampened crop projections, and long-term backwardation has stifled diesel storage and movement between regions in the US. Associate refined products director Matthew Kohlman and diesel pricing specialist Wendy Dulaney discuss seasonal trends in ULSD as fall approaches. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).
China’s private refiners on tenterhooks as Beijing kicks off fresh round of inspection
Aug 25 2022
Beijing has been stepping up efforts to tighten supervision and standardize operations of its refining sector. It launched a series of investigations on refineries beginning April 2021. The latest round of inspections this month will focus mainly on tax issues, as small-scale private refiners often fail to fulfill their tax obligations in an attempt to stay competitive. In this podcast, S&P Global Commodity Insights' experts Philip Vahn , Asia oil market managing editor and Oceana Zhou and Daisy Xu , senior analysts covering China market discuss Beijing's latest tax investigation and its impact on independent refineries’ future operations. Subscribe to Platts Dimensions Pro for access to assessments and premium content covering Platts Gasoline Unl 92 FOB Spore Cargo ( PGAEY00 ), Platts Gasoil FOB Spore Cargo ( POABC00 ) and much more. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).
Supply-driven jet fuel market drops from record high despite summer boost
Aug 04 2022
The days of vaccine certificates and COVID-19 tests for travel are long gone for most, and yet jet fuel demand doesn’t seem to have fully recovered from the pandemic. S&P Global Commodity Insights reporters Virginie Malicier and Maxim Kotenev tell Francesco Di Salvo how record-high physical premiums have led to a flurry of eastern cargoes sailing to Europe, and how short-staffed airlines and airports have had to cap passenger capacity growth despite ample pent-up travel appetite. Check our Jet CIF NWE Cargo assessment (PJAAU00) on Platts Dimensions Pro. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).
Platts to exclude Russian-origin material from European gasoline assessments effective Sept. 1, 2022
Aug 01 2022
Effective Sept. 1, 2022, Platts will no longer reflect Russian-origin product in its open-origin European assessments of gasoline barges and cargoes. The decision by Platts, part of S&P Global Commodity Insights, follows a review into the continued inclusion of Russian-origin material in its European barges and cargo assessments for gasoline, jet fuel and LPG as announced in a subscriber note published June 22 and reachable at: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/062222-platts-seeks-feedback-on-russian-product-in-european-gasoline-lpg-jet-fuel-assessments Platts assessments reflect the value at which a standard, repeatable transaction for merchantable material takes place, or could take place, in the open spot market at arms length. Feedback gathered from the market, as well as observed market activity in recent weeks, has shown a significant move away from Russian-origin material in the spot market. Furthermore, Platts has observed that Russian material does not constitute a typical flow and significant portion of supply European balances of gasoline. This affects the following assessments: Assessment Code Gasoline Prem Unleaded 10ppmS FOB Med Cargo AAWZA00 Gasoline Prem Unleaded 10ppmS CIF Med Cargo AAWZB00 Gasoline 10ppm CIF NWE Cargo AAXFQ00 FOB AR Eurobob Gasoline Barges AAQZV00 FOB AR E10 Eurobob Gasoline Barges AGEFA00 10ppm premium unleaded barges PGABM00 98 RON gasoline 10 ppm AAKOD00 FOB AR Reformate Barges AAXPM00 FOB NWE WAF-grade gasoline cargo AAKUV00 CIF WAF WAF-grade gasoline cargo AGNWC00 Please send any feedback, questions or comments to email@example.com and firstname.lastname@example.org. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.
Infographic: Demand destruction in focus as inflation hits commodity markets
Jul 27 2022
Commodity markets are on red alert. Economic warning signs are coming in thick and fast with skyrocketing inflation in Europe and the US, rising interest rates and slowing economic growth. Industrial metals are leading the decline lower, with energy and agriculture prices also off their March peaks amid a weakening demand outlook. Russia’s supply side risks and China’s recovery uncertainty will also shape the direction of commodity markets as 2023 looks set for a bumpy year. Click here to see the full-size infographic
Japan to introduce new refining regulations, incorporate decarbonization efforts
Jul 26 2022
Japan will start formal policy discussions July 28 to introduce a fourth round of refining regulations aimed at boosting the processing volume of vacuum residue, with preferential treatment expected for efforts to decarbonize the refining process, sources told S&P Global Commodity Insights July 26. The talks will be launched by the Ministry of Economy, Trade and Industry's natural resources and fuel committee, which will present ideas for new regulations and review regulatory responses from the last round that expired at the end of March, the METI sources said. The new regulations would likely follow the framework of the third round of regulations, with new elements relating to decarbonization efforts by refiners to be considered as part of the regulatory response, the sources said. The refiners' potential use of blue and green hydrogen instead of gray hydrogen in the refining process could be considered among the decarbonization efforts, the sources added. The third round of regulations required refiners to achieve a national target vacuum residue ratio, the daily residual processing volume as a percentage of the daily crude processing volume, of 7.5% by the end of March 2022. Given a significant drop in Japanese refiners' refining volumes in the past two years because of the pandemic-led demand slump, Petroleum Association of Japan President Tsutomu Sugimori said March 22 that "It will be difficult to achieve." "However, we are in the midst of emergency situations such as the coronavirus pandemic and the Ukraine issues, so that we expect to see some sort of mitigation," Sugimori added at the time. Previous regulations The third round of regulations introduced in 2017 focused on increasing processed volumes at residue cracking units across Japan's refining fleet with improvements in productivity. The previous two rounds of regulations had led to a reduction in Japan's overall crude distillation capacity. The third round of regulations required refiners to increase processing volumes of vacuum residue by the end of fiscal year 2021-22 (April-March) from baseline average volumes processed over FY 2014-15 to FY 2016-17. Under its definition, vacuum residue has a true boiling point of more than 565 degrees Celsius. This includes atmospheric residue, vacuum residue, vacuum gasoil and other residues processed at fluid catalytic cracking and residue fluid catalytic cracking and cokers. In order to comply with the third round of regulations, refiners had been expected to revamp their facilities, including carrying out work to upgrade pumps and change catalysts to be able to process more residues at units such as FCCs, RFCCs and cokers by the end of March 2022. Japan's nameplate refining capacity was 3.5188 million b/d across 22 refineries as of March 31, 2017 down 7.1% from 3.7897 million b/d earlier, following local refiners' response to the earlier rounds of refining regulations. The country's operable refining capacity stood at 3.4578 million b/d across 21 refineries at the end of March 2022.