Shell Singapore, a unit of Royal Dutch/Shell Group, said on Monday it would reduce crude runs in December, the first reduction in operating rates since July. The company said it would run the 59,000 tonnes per day (tpd) Bukom refinery at an average rate of 40,000 tpd this month, down from 46,000 tpd in November.

"In December, Shell's crude runs at the Bukom refinery will be approximately 40ktpd," Shell said in a statement. The November run rate was the highest operating level for Shell Singapore since November 1998, when the refinery ran at between 42,000 and 46,000 tpd.

Analysts and traders said a sharp drop in refinery margins in the past month had made it inevitable that operators would reduce throughput rates. "It was foreseeable. Whenever refiners raise runs to take advantage of better margins, those margins will disappear," said Jim Weinrauch at energy consultants Poten and Partners in Singapore.

According to Reuters calculations, simple refining margins for the last 15 days averaged $1.95 per barrel, compared with a profit of $3.15 over the past year. Shell officials said the December throughput did not include third party processing.

The European oil major has an agreement with Indonesian state oil company Pertamina, which expires at the end of December, to process 50,000 barrels per day, or 7,000 tpd, of crude. Shell has the largest refinery in Singapore and its runs are closely watched as a barometer of market sentiment.

Ample supplies and weak demand have left Asian oil products' markets sagging in the fourth quarter against a backdrop of soaring crude prices. Many refiners had been driven to consider cutting throughput rates in December.

"The buying season for traditional winter fuels such as gas oil and jet kerosene has not taken off as we had expected because of comparatively warmer weather in North Asia," a trader said. "This means storage tanks in Asia are brimming with product, effectively putting an end to the buying season."

Cementing the weak outlook for refinery runs, a few Asian refiners were seen offering previously purchased crude cargoes for November and December loading. Royal Dutch/Shell Group alone sold up to 1.2 million barrels of Labuan crude in early November.

Analysts said the outlook for refiners remained fairly bleak unless a sudden cold snap in northern Asia triggered a second winter buying spell. "Everyone has comfortable levels of inventory, so don't expect them to buy unless there was a drastic change in the weather," said Poten and Partners' Weinrauch.