info@equitypetroleum.com | | |

Asian refiners demand for sweet crude drives changes in purchases from Nigeria, others

source Emergy Mix Report on Sep 10, 2019

Asian refiners are buying more light crude and trimming purchases of heavy oil, as they tweak production to meet rising demand for low-sulphur fuels in the shipping sector.

Asia’s demand for light, low sulphur crude grades, known as sweet crude, produced by countries such as the United States, the United Arab Emirates, Brazil and Nigeria has strengthened after the price gap between light and heavy crude narrowed this year amid record U.S. shale production and tighter availability of heavy oil.

“The traded crude slate is getting lighter and sweeter. At the same time, expansion of the refining system is geared towards heavier crude,” Vitol’s Global Head of Research Giovanni Serio said at the Asia Pacific Petroleum Conference (APPEC).

“It’s a real challenge that refineries are facing every day and (will face) for the next few years.”

Refiners globally have been building expensive secondary units that can further process the residual fuel oil left over from the initial refining of heavy oils into higher quality products such as gasoline and diesel. The global shift towards lower sulphur fuel for ships from January was supposed to lower heavy, high-sulphur crude prices and widen its price relative to light oils but that has not happened.

Instead, U.S. sanctions on Iran and Venezuela combined with production quotas set by the Organization of the Petroleum Exporting Countries have tightened heavy oil supply since the second quarter.

Saudi Arabia, the world’s largest oil exporter, has committed all of its Arab Heavy crude production to term customers and it has a 400,000 barrels per day refinery at Jizan starting up in the fourth quarter that will require more heavy oil supplies, a source familiar with the matter said.

Strong heavy crude prices have reduced the margins for secondary units, prompting refiners to trim output at these units and process more light oil to produce low-sulphur fuel oil or marine gasoil to meet International Maritime Organization (IMO) specifications from January, refining sources said.

To produce IMO-compliant fuels, some refiners have increased purchases of light crude in the fourth quarter, underpinning spot premiums for grades such as Abu Dhabi’s Murban crude, U.S. West Texas Intermediate (WTI) Midland and Brazilian Lula, according to several traders that participate in the market.

Japan’s third-largest refiner Cosmo Oil is processing more light crude to produce very low-sulphur fuel oil (VLSFO) although it will also buy more heavy crude for its delayed coker unit at Sakai after an expansion, said Mitsuyasu Kawaguchi, the general manager of its crude oil and tanker department.

“International supply of heavy crude is being decreased because of sanctions … so we see some challenges in how much heavy crude we’re going to term up and what’s the game plan for the light side,” he said.

South Korean refiners have also increased light crude imports from the United States to boost VLSFO supplies.

“We’re increasing the use of WTI and WTL (West Texas Light) to produce VLSFO,” said a South Korean refining source who declined to be identified because he is not authorised to speak to media.

“Using those grades is easier to produce VLSFO because we can make it without going through conversion units.”

State-owned refiner ChemChina has also increased its Murban crude purchases over the past two months, buying at least 2 million barrels per month, offsetting imports of comparative heavier grade Upper Zakum, said several traders that participate in the market.


Source: LSE

More Insights
Solo Oil announces disposal of Burj investment

Solo Oil has signed a sale and purchase agreement (‘SPA’) to exit its 20% investment in Burj Petroleum Africa, a company which had applied for various undeveloped fields in the 2014 Nigerian Marginal Fields Bid Round. Solo will divest its interest in this non-core asset for a nominal consideration of £1 to Burj Petroleum Corporation, an existing shareholder…

NLNG vows to add more value to Nigeria’s economy

The Nigerian Liquefied Natural Gas Limited (NLNG), has stated that it will continue to deepen its relevance to Nigeria’s economy. Sophia Horsfall, Manager, Corporate Communications and Public Affairs, who gave the assurance when he led a team of public affairs personnel of the company to the headquarters of Independent Newspapers Limited (INL) in Lagos ,also…

Nigeria’s finance minister lowers benchmark crude forecast on potential oversupply

Nigeria’s finance minister said on Tuesday there were “strong indications” of an oversupplied oil market next year and lowered price expectations for the country’s benchmark crude. Zainab Ahmed told journalists that she had lowered a forecast for Nigeria’s benchmark price to $55 per barrel from $60 per barrel, in part “to cushion against an unexpected…

Nigerian crude suffers along with European margins

Price offerings for Nigerian light sweet crude have eased in recent days, traders said, as refining margins for European gasoline finished the week sharply down. European refiners sought to offload gasoline tailored to summer specifications and cracks ended the week down on Friday. Asking prices for major grades have eased, traders said, with Bonny Light…

EPSNL Insights in a collation of Nigeria's oil and Gas Industry news and developments pulled together from various sources to enhance our site's user awareness...

Previous Insights
Nigerian crude offered from S-African storage as Total wins BPCL tender

A cargo of Nigerian crude was offered from storage in South Africa, traders said on Wednesday, reflecting the Brent market's move into a structure...

Shell to begin gas production at expanded Gbaran-Ubie gas project

Royal Dutch Shell says it has begun gas production from the second phase of the Gbaran-Ubie project in Nigeria's Niger Delta, Nasdaq reports. The project...

NNPC, IOCs plan joint security apparatus to reduce oil and gas sabotage

The Nigerian National Petroleum Corporation (NNPC) is working closely with the international oil companies (IOCs) to deploy a structured and holistic security apparatus to...