Singapore refinery crude runs down
Singapore refinery crude runs down
SINGAPORE (Reuter): Singapore oil refiners are reducing
operations hoping to reverse losses suffered in the last two
weeks but are having to contend with weak product demand in the
Far East, industry sources said.
The reduced runs in Singapore refineries also mean less crude
oil intake and would be bearish for the crude oil market, crude
oil traders said on Wednesday.
Esso Singapore Pte Ltd has decided to reduce runs by about 15
percent at its 220,000 barrel-per-day (bpd) refinery immediately
and for an indefinite period.
Shell Eastern Petroleum Pte Ltd said it has scheduled a
shutdown of a 100,000 bpd crude distillation unit for two weeks
in September for maintenance. A spokesman said the shutdown had
nothing to do with poor margins.
Esso's unplanned throughput cut of some 30,000 bpd means the
U.S. oil company would have to divert crude oil bought earlier
for Singapore to affiliates in the region, sell off unwanted
crude and defer further crude purchases, an Asian trader said.
"Esso's decision was forced by economics, and is for an
indefinite period till the situation improves," a trade source
said. "If margins don't improve, it may continue with the cut."
Primary refining margins -- taking into account crude cost and
the value of spot refined products -- turned negative in early
August after slipping for most of July.
"Margins fell when crude prices rose, but mainly because
product prices have dropped faster," an oil company trader said.
Jet fuel and gas oil, which make up most of the refined
product yield, are at their lowest levels since August 1994.
"Most products are doing badly, demand is very bad," a senior
oil executive said. "Singapore refiners are having tank-top
problems for jet kerosene and gas oil."
The primary refining margin for a cargo of Middle East Dubai
crude would be a loss of US$0.30 a barrel, compared to a profit
of around 60 cents four weeks ago.
Refining a cargo of Malaysian Tapis crude would yield a loss
of 50 cents compared to a 60 cent profit four weeks ago.
It would take a while to draw down high product stocks but the
sources said they are hoping Esso and Shell's reduced operations
would tighten product supplies in the region.
Also, they said gas oil from Europe had not been heading for
the Far East due to lower prices here, whereas such movements in
the past had increased competition for Asian markets and helped
depress prices.
"The crude units' shutdown will reduce supplies but it is
difficult to forecast what the impact on margins will be," the
Shell spokesman said.
Although oil traders are hopeful of product demand picking up
in the fourth quarter for the Northern Hemisphere winter demand,
bearish sentiment prevails.
"With falling crude prices, sentiment has been affected, and
product prices could fall faster," another oil company trader
said.
"More North Sea crude is coming out with new production, and
OPEC ministers would surely clamour for market share in their
November meeting. All this would be bearish," he said.