Two S'pore oil refiners deepen production cuts
Two S'pore oil refiners deepen production cuts
SINGAPORE (Reuters): Two Singapore oil refiners have cut
production further amid increasing price pressures in Asia, where
excess supplies dominate.
Industry sources said the refiners are adopting an aggressive
stance in an effort to boost profit margins.
This week Shell and Esso have announced deeper run cuts at
their Singapore refineries.
Meanwhile, the island's other two refiners, SRC and Mobil,
have said they are ramping production to near maximum.
But industry sources said this was being done for specific
operational reasons, rather than in response to an expectations
that market conditions are improving.
Singapore, Asia's swing refining center with more than 80-
percent of its 1.2 million barrel-per-day (bpd) output exported,
is the region's bellwether for the state of the industry.
The refineries have maintained production cuts for several
months in response to weaker Asian demand, plus ample global
supplies.
But sources said the production cuts mask Singapore's ability
to exploit the volatile market to its advantage by turning on the
taps within days when product prices rise and cutting back when
prices dip, they said.
"Product prices are quite volatile. Refiners want to catch a
crest. You will see these kind of cuts and increases of output
from time to time," a refining source at one oil major said.
In the past two months, refining margin from processing crude
at the basic stage have fluctuated from a loss more than $1.40
per barrel to a slim profit of 50 cents, refinery sources said.
Primary margins have now fallen to a loss of between 20 to 60
cents, depending on the type of crude processed.
As a result of the increasing losses, at a time when the peak
winter demand period draws to an end, two refiners have deepened
production cuts to ease the pain.
On Monday, Shell Singapore, the country's largest refiner,
said output in February will be cut by 15 percent to 50,000 tons
per day (tpd), or 370,000 barrel-per-day (bpd), from a near seven
percent reduction in January.
"Our run levels are currently around 50,000-tpd and...these
will be subject to prevailing market conditions," a Shell
spokeswoman said on Monday.
The second refiner, Esso Singapore extended a 15-20 percent
cut into February from late January at its 230,000-bpd refinery.
But Singapore's two other refiners are raising production to
full capacity in February after reducing output in January.
Mobil Oil Singapore cut runs by 20 percent for a week in
January -- against an original target of a five percent cut --
following a small fire.
Production is now close to the 300,000 bpd capacity, to ensure
adequate supplies for its integrated downstream petrochemical and
lubricants plant in Singapore.
The fourth, Singapore Refining Co (SRC), jointly owned by
Singapore Petroleum Co, British Petroleum and Caltex has also
raised output to full capacity in February after a near nine
percent cut in January.