In Oil & Companies News 30/07/2015
Asian oil producers Malaysia, Vietnam and Australia have seen prices for their crude grades fall to multi-year lows this month as refinery margins weakened amid slowing regional demand and a buildup of product stocks over the first half of the year.
Asian refiners’ appetite for crude has decreased as profits from turning a barrel of oil into fuel, diesel in particular, dropped back this month from higher-than-average margins in the first six months of 2015. Diesel margins last week plunged to their lowest in more than five years.
The strong first-half margins had pushed refiners across Asia to operate their plants at near full capacity, pumping out more fuels at a time of slowing diesel demand growth in global No.2 oil consumer China.
“The Asian market is set to bear the brunt of rising middle distillates production in the face of relatively lacklustre demand,” analysts at Energy Aspects said in a note.
The product glut was intensified by shipments into Asia from new Middle East refineries as crude producers ventured further into the downstream sector.
“Crude markets have yet to face up to the cruel truth that the full extent of the global oversupply has been covered up for months by very high refinery runs,” Energy Aspects said.
Vietnam, second biggest exporter in Asia after Malaysia, has seen spot differentials for export grades like Ruby and Chim Sao fall by around $1 a barrel or more in July from the previous month.
Spot premiums for Malaysia’s Kimanis grade dropped to the weakest since production of the offshore development – operated by Royal Dutch Shell – began last year.
This month five additional Kimanis cargoes of 600,000 barrels each are being offered on the spot market, after field maintenance curbed exports in the two previous months.
“I really don’t see any bullish factors in the market now,” said one trader with a major crude producer in the region.
Profit margins in the Singapore hub, where companies like Shell, ExxonMobil Corp and PetroChina Co run some of the world’s biggest refineries, have fallen by around $2.50 per barrel this month compared with last month, according to Reuters data.
Now refiners are also expected to shut down some units for seasonal maintenance in September and October, further denting demand for crude.
Producers in the region mostly price their crude against the Brent benchmark, while Middle Eastern producers mostly price their oil off the Dubai benchmark.
Asia-Pacific grades have become less attractive this month relative to Middle East grades after Brent’s premium to Dubai crude widened by more than $1 a barrel. DUB-EFS-1M
Source: Reuters (Editing by Tom Hogue)
