Adding to the upturn is the fact that maintenance at the world's biggest processing complex, run by Reliance Industries, threatens supply cuts.
The bounceback is helping Asian refiners after a surge in capacity reduced returns this year by 21 per cent. China Petroleum & Chemical Corporation (Sinopec)is among companies poised to benefit from further gains after industrial production and retail sales in China, the world's second-biggest oil consumer, expanded at the fastest pace since March, according to consultants including KBC Energy Economics and IHS.
"Chinese demand for refined products is set to increase next month ahead of the Lunar New Year, so product [profits] will improve," said Ehsan Ul Haq, a senior market consultant at KBC in England.
He forecasts the refining margin will average US$4.60 (Dh16) a barrel next month compared with $3.90 this month.
"At the same time, shutdowns at plants mean there will be lower supply and this is going to push margins up further."
The profit, or crack spread, from turning Dubai oil into fuels such as petrol and diesel has jumped more than fourfold since last month to $3.03 a barrel as of Tuesday, according to data compiled by Bloomberg. That is still down 62 per cent from this year's peak of $7.93 on August 10. The margin averages $4.15 a barrel this year compared with $5.26 in the same period last year.
The crack in Singapore for Dubai crude, the benchmark grade for Asia, has rallied after sliding as low as 72 cents a barrel last month amid plans by Reliance to close part of its Jamnagar complex in India, the world's biggest refining facility. Processors from Japan to Taiwan are idling units at plants with capacity of 2.7 million barrels a day, equivalent to about 9 per cent of Asia's demand.
The profit from making gasoil, or diesel, climbed 19 per cent to $19.78 as of Wednesday from a four-month low last month, according to data from PVM Oil Associates, a broker in London.
China's oil consumption will rise by 520,000 barrels per day (bpd) this quarter from the prior three months, equivalent to all of the global increase, the International Energy Agency estimated in its Monthly Oil Market Report this week. The nation's growth next year will be 310,000 bpd compared with 860,000 globally, said the agency, based in Paris.
"Oil demand in China started to recover in October as factories began producing goods to meet Christmas seasonal demand from overseas markets," said Victor Shum, a managing director at IHS.
"Asian refining margins should improve in December and January. The planned shutdown of one of Reliance's crude distillation units for maintenance in January will tighten supply." The rebound in margins may be short-lived as fuel output in China surges and new refineries start operations in Asia, according to Mr Ul Haq, who says profit will average $4.60 a barrel in the three months ending March. It averaged $4.67 in the same period last year, data compiled by Bloomberg shows. China's oil processing rose to a record 10.2 million bpd last month, the statistics bureau's data shows.
"Once demand eases a bit after the Lunar New Year, there is going to be enough supply of oil products in the market," said Mr Ul Haq. The Lunar New Year holiday starts on February 10.
China and India will increase refining capacity by 1.4 million bpd, out of global growth of 2.4 million, according to Morgan Stanley. Asia will account for 32 per cent of the world's capacity and become "increasingly more important to global oil balances", said Hussein Allidina, the head of commodities research at Morgan Stanley in New York.
China Petroleum & Chemical, Asia's biggest refiner, started a crude unit 10 days ago at its Maoming refinery that almost doubled the plant's capacity to more than 402,000 bpd. Sinochem Group plans to start a trial run at its new refinery in south-eastern China's Quanzhou city by the end of June with a capacity of 241,000 bpd.
Returns may also falter amid concern about the strength of the global economic recovery, said Sonam Udasi, an analyst at IDBI Capital Market Services in Mumbai.
China's exports, an indicator of world demand for goods, rose 2.9 per cent last month, customs data showed on Monday, compared with a median estimate of 9 per cent in a Bloomberg survey. Japan, the world's third-biggest oil user, sank into a recession in the second and third quarters, according to data from the cabinet office in Tokyo.
"At the moment, no one can really stick their neck out and say that global sentiment is set to improve so much that it will give a substantial boost to refining margins," said Mr Udasi.
Reliance Industries may shut a crude processor as well as naphtha and vacuum gasoil units for planned maintenance next month at the newer of its two plants at Jamnagar, two people with knowledge of the plans said. The facility, with a capacity of 580,000bpd, may be halted for two to three weeks, the people said, asking not to be identified. The two plants at the complex can process 1.24 million bpd.
Bharat Petroleum, India's second-biggest state refiner, shut a crude-distillation unit at its 190,000 bpd Kochi plant last month for maintenance.
Taiwan's CPC Corporation scheduled 40 days of maintenance on its 200,000 bpd Taoyuan Number 1 crude oil distillation unit (CDU) from last week, according to a company official who asked not to be identified. Formosa Petrochemical Corporation may halt its Number 1 CDU at its 540,000 bpd Mailiao plant in March for maintenance, said Tsao Ming, the company's president.
Japan's TonenGeneral Sekiyu KK idled a catalytic cracker at its 335,000 bpd Kawasaki refinery last month after a malfunction. The unit resumed last week, according to Kosuke Kai, a company spokesman.
SK Innovation Company, the owner of South Korea's biggest oil refinery, plans to shut two crude-processing units at its 840,000 bpd Ulsan facility for maintenance in March and in May, said a company official, asking not to be identified.
China may run its refineries below capacity and implement price reforms to prevent processing margins collapsing, according to Deutsche Bank. Expansions totalled 700,000 bpd this year and will exceed that next year to be more than twice as much as demand growth of 321,000 barrels a day, it estimates.
"We are not expecting refinery runs to ramp up by that amount given the demand outlook is more modest in comparison," said Soozhana Choi, the bank's chief oil strategist.
"One key development to watch will be steps to reform the fuel price, which will lead to a normalisation of refinery margins.
"Policymakers are expected to target a reasonable margin in light of the losses the sector has been incurring," he said.
PetroChina, the nation's second-biggest refiner, lost 30 billion yuan (Dh17.61bn) from crude processing in the first nine months of this year because of government price controls. Sinopec did not give a figure for its processing operation.
* with Bloomberg News