[SINGAPORE] Oil product inventories surged to their highest since at least 1999, signs that markets are struggling with a supply glut that could prompt refineries in the region to cut rates, traders and analysts said on Thursday.
For the first time since August 2014, stocks of oil products climbed all at once for the second straight week, pointing towards a growing supply glut that could pressure refiners globally to cut rates. "Diesel stocks are rising fast, especially in the East of Suez," Energy Aspects analysts said in a note on Thursday. "Run cuts to the tune of 0.7 million barrels-per-day globally will be needed to balance Q4 2015's diesel (supply) worldwide, especially given the rate at which onland stocks are rising," it added.
Singapore's middle distillates stocks, which comprise gasoil and jet fuel, rose nearly 6 per cent to a nearly four-year high of 13.172 million barrels in the week to July 22, IE data showed.
With Asian gasoil margins at a more than five-year low on the back of seasonally weak demand and mounting supplies, traders said they are storing the product in landed tanks.
While gasoil shipments to Europe are profitable, high freight rates are hampering flows, trapping the cargoes in Singapore, they added.
The data showed that gasoil shipments to Australia and Togo fell last week while imports from China, Japan, South Korea and Taiwan increased.
But there was increased flow to the Netherlands from Singapore for gasoil, which is unusual due to higher freight rates, but suggests that this might increase as they try to rid of high inventory, one of them said.
The jump in stocks was also caused by a jet fuel shipment from Malaysia last week, after none the week before, the data showed.
Residue oil inventories were at a new historical high of 28.02 million barrels in the week to July 22, surpassing the previous record in early June by 1.5 per cent, data from International Enterprise showed.
Despite residual imports falling nearly 40 per cent, stocks have remained high as traders are loading back to tanks some of the record volumes of fuel oil traded on Platts' pricing process in June, sources said.
More than 3 million tonnes of the 5.994 million tonnes traded in June were due to load in July.
Light distillates stocks, which include gasoline and reformate, also rose 208,000 barrels to a five-week high of 12.26 million barrels.