Singapore oil trade declines after 10 years

Singapore oil trade declines after 10 years

SINGAPORE (AFP): Singapore's physical oil trade, led by a sharp fall in product exports, is headed for its first year-on- year decline after 10 years of strong growth, a leading oil journal forecast yesterday.

Preliminary figures show exports in the six months to June fell nearly six percent from a year earlier to 924,444 barrels per day (bpd) as Singapore lost market share to regional and western rivals, the Singapore Oil Report said.

Exports were unlikely to recover strongly enough for the rest of the year to offset the decline, the publication predicted in its upcoming edition, excerpts from which were released to AFP.

An expansion of refining capacity in the region, a sharp rise in product flows from the West to Asia, reduced domestic throughput on weak margins and the decline of the Chinese market following import clampdowns dented Singapore's exports.

South Korea, Indonesia, Malaysia, Thailand, Japan and the Philippines have expanded refining capacity by more than 900,000 bpd since 1994 and are expected to add another two million bpd over the next two years.

The expansion has reduced the region's dependence on Singapore, the world's third largest oil trading center after New York and London, with physical trade totaling US$55 billion last year. It is also the world's third largest refining center after Rotterdam and Houston.

Refiners have been under pressure with profits shaved to about $2 a barrel compared with $4 a barrel a few years ago when refining capacity was overwhelmed by booming Asian oil demand.

In the three months to March, Singapore's cargo trade reached more than 2.45 million bpd of products and crude imported and exported, a 4.6-percent rise over the corresponding period of 1994.

Rise

But the rise was more than offset by a second-quarter slump that resulted in trade volume falling by about 2.5 percent in the first half, the report said.

Product exports plunged more than eight percent in the three months to June from 1.03 million bpd in the previous corresponding quarter, most of the losses resulting from import cutbacks by large buyers such as Malaysia, China, Hong Kong and Thailand.

The buyers either expanded domestic output or bought directly from suppliers. China led the cutbacks by reducing intake from Singapore by more than 65,000 bpd to 60,000 bpd, the report said.

Diesel exports were hardest hit in April-June, falling by more than 12 percent to 326,000 bpd on reduced intake by main customers such as Hong Kong, China, Malaysia and Thailand, the journal said.

"Singapore's diesel has been displaced not only by higher domestic output in the key markets, but also supplies from the West," it said.

Gasoline sales were hurt by import cutbacks that reversed a 14.4-percent rise in January-March with a 17-percent decline in the following three months, while naphtha sales were down 5.4 percent for the first half.

The slowdown and diversion of trade away from the island state were also reflected by independent storage tank companies which saw utilization rates fall to between 50 percent and 60 percent, the lowest in a decade, the oil report said.

Despite the worries, traders were confident of Singapore's future in the physical oil business, noting the concentration of refineries, efficient port services, infrastructure and a strategic location unrivaled in Asia, it said.

Emerging economies such as Vietnam and Bangladesh were stepping up purchases from Singapore and could soon be followed by Cambodia and Burma, the report said, while the region's oil demand will eventually outpace its refining capacity.