Business | Oil & Gas
Asian refiners process less crude as waning demand hits margins
Oil refiners in Asia have cut or are planning to trim crude processing rates, tracking moves by Western peers, as margins were hit by weakening fuel demand.
- Reuters
- Published: 23:01 August 14, 2008
Singapore: Oil refiners in Asia have cut or are planning to trim crude processing rates, tracking moves by Western peers, as margins were hit by weakening fuel demand.
The cuts were led by Singapore Refining Co (SRC), which lowered rates by up to seven per cent at its 285,000 barrels per day (bpd) refinery, while ExxonMobil might follow with an 8-10 per cent reduction at its 605,000 bpd Singapore complex.
South Korean and Thai refiners are also cutting runs, signalling more extensive regionwide cutbacks than in January, when Japanese and Korean refiners pulled back runs after a mild winter and slowing Japanese economy hit fuel consumption.
At that time, firm demand in Australia and the Middle East kept Singapore plants running at full tilt. But soaring prices had dented consumption of motor fuels worldwide this time, hitting more refiners across Asia, Europe and the US.
Complex margins in the Singapore refining hub halved in July from April to $4.97 a barrel and stood even lower in the last 15 days at an average of $4.13, Reuters data showed. But simple margins - measuring the value of fuel produced from the first round of crude distillation - rose to 47 cents a barrel over the last 15 days from a discount of $1.76 on average from May through July on tighter fuel oil supplies.
Thai refiners, with a combined capacity of just above one million bpd, are considering cuts due to eroding margins, said PTTAR President Chainoi Puankosoom, who is also the spokesman for the country's refining industry.
Review
"All refineries review their production plan to match oil prices every month. If they are going to make losses from exports, they will only focus on the domestic market," he said on Wednesday.
In South Korea, Hyundai Oilbank will be the first to cut refining rates to 300,000-310,000 bpd within the week, after raising them earlier this month.
"There is so much supply from Northeast Asia. They have to cut runs sooner or later," said a trader.
Hyundai Oilbank is the smallest among the country's four refiners and the most sensitive to refining margins.
"It would be ideal to push the crude runs down below 300,000 bpd but we can only fiddle around with 10,000 bpd or so because of inventory levels," said a Hyundai Oilbank source.
An SK Energy source said the top refiner was also considering cuts but face the same issue of managing crude stocks.
Reflecting worries about fluctuating oil prices, a GS Caltex crude analyst said: "Margins are very volatile, so we can't say how much we will be running in September."
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