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Asia-Pacific crude-supply glut prompts refineries cut rates

[SINGAPORE] The Asia-Pacific crude market weakened on Friday as a glut of oil products in the region prompted some refiners to lower runs at their plants.

Taiwan's Formosa Petrochemical Corp said on Friday it would reduce the amount of crude it processes at its refinery in August by 9.1 per cent from its initial plan due to lower demand for oil products.

Spot differentials for Vietnam's Bach Ho crude weakened some 50 cents from the previous month, after PV Oil sold a heavier type of the grade at a discount of $1.50-$2 a barrel to dated Brent, traders said.

PV Oil, the marketing arm of PetroVietnam, had offered 250,000 barrels for Sept 1-7 loading and 300,000-350,000 barrels for Sept 8-14 loading in a tender. Japan's Idemitsu Kosan bought one of the cargoes, the traders said.

The decline in the relative value of regional sweet crudes this year has been accelerated by the recent resurgence in prompt Dubai, analysts at JBC Energy said in a note to clients. "Both (Tapis and Minas) sweet grades are now weaker against Dubai than at any point in the last several years," they said.

Regional grades could draw some support from Brent's narrowing premium to Dubai swaps. Brent-Dubai Exchange of Futures for Swaps (EFS) DUB-EFS-1M widened 2 cents to $0.68 a barrel on Friday, but held near a five-year low reached earlier this month.

The condensate market followed the trend in the crude market as both refiners and splitters were faced with lower margins and a weak naphtha market.

Spot differentials for East Timor's Bayu Undan fell some 50 cents per barrel, after ConocoPhillips sold 600,000 barrels of the condensate to an unnamed buyer at around $2 a barrel below dated Brent, traders said.

Qatari condensate premiums have already fallen to six-month lows for cargoes loading in September on weak demand in Asia due to poor refining margins.

China's Dragon Aromatics, a major buyer of condensate, has been shut by a fire since April and is not expected to restart in the next two months. It remained unclear when Singapore's Jurong Aromatics Corp (JAC) would restart operations. "I don't see much change for October (condensate) cargoes. There is still oversupply in the market," one trader said.

No deals were heard for Australia's Northwest Shelf (NWS) condensate.

India's MRPL is seeking 1 million barrels of sweet crude for Oct. 1-15 loading in a tender that closes on Aug. 11 with bids valid for two days.

ONGC offered 700,000 barrels of Sokol crude for Oct. 1-7 loading in a tender that closes on Aug. 5 with bids valid until the following day.

Japanese crude imports fell to a 26-year low for the month of June, totaling 2.94 million barrels per day last month, an official with the Ministry of Economy, Trade and Industry said.

Asian imports of Iranian crude oil rose from a year ago in June, the last month before a landmark agreement that will eventually lead to more exports from the country was reached on Tehran's disputed nuclear programme.

South Korea's GS Energy Corp said in a statement on Friday that it will supply a total of 9 million barrels of Murban crude by the end of this year to its sister company GS Caltex Corp from its stake in oil fields in the United Arab Emirates.