By Nick Toscano
Fuel giant Ampol’s Brisbane oil refinery has benefited from a 4.5 per cent year-on-year boost to its profit margin, which could rise further from next month as European nations impose new bans on Russian oil products.
Ampol, the nation’s largest supplier of petrol, diesel and jet fuel, told investors on Wednesday that margins from processing crude oil into fuels at its Lytton refinery during the December quarter remained above historical averages at $US11.75 ($16.79) a barrel, up from $US11.24 a year ago.
Ampol’s Lytton oil refinery in Brisbane.Credit: Bloomberg
However, the result marked a drop from $US15.46 a barrel in the September quarter.
Gordon Ramsay, an analyst with the Royal Bank of Canada, said Ampol’s December quarter margin was 19 per cent below his forecast, largely because Ampol purchased crude oil up to three months ahead of usage and is exposed to a “time lag” on pricing changes.
“We forecast Ampol to continue to realise higher than historical average Lytton refining margins going into 2023, partly offset by freight costs and quality premiums,” he said.
“Going forward, we see proposed EU sanctions on Russian product imports on February 5 as a key hinge point with upside risk to refiner margins, particularly diesel.”
As Western nations impose economic sanctions on Moscow and shun Russia’s vast energy sector, the price of oil and transport fuels have been soaring. The benchmark Brent oil price, which broke through $US100 a barrel last year, has since retreated amid investor worries about a global economic slowdown and rising coronavirus cases in China.
Ampol, like fuel retailers everywhere, was hard-hit during 2020 amid COVID-19 restrictions keeping people indoors, cars parked in driveways and planes grounded.
During the depths of the crisis, spiralling losses prompted Ampol to launch a review into the future of its Lytton oil refinery in Brisbane, which employs 550 people, and consider shutting it down for good.
Two other oil refineries — ExxonMobil’s Altona plant in Victoria and BP’s in Perth — closed their doors amid the unprecedented collapse in demand for petrol, diesel and jet fuel. But after reaching a rescue deal with the federal government, Ampol and rival refiner Viva Energy have since agreed to keep Australia’s two remaining refineries open until at least mid-2027.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.