Energy News Today

Supply overhang may slow Australia’s crude exports revival from 11-month lows

Crude exports out of Australia may struggle to post a sharp rebound from 11-month lows seen in January, as refinery turnaround in Northeast Asia will likely keep appetite for feedstock relatively weak, although continued demand for condensate cargoes that aid in making medical hygiene products would offer a silver lining to an otherwise subdued market.

Traders said Australian exporters could face hurdles finding ample buyers with South Korean refineries heading into a turnaround season, while an overhang of condensate cargoes are expected to emerge in the market amid splitter outage from Qatar Petroleum.

Exports of crude oil and other refinery feedstocks from Australia fell for the second consecutive month in January to an 11-month low of 6.58 million barrels, down 25% year on year and 14% weaker month on month, according to preliminary data from Australia’s Department of the Environment and Energy.

The January total was the weakest monthly volume since 5.65 million barrels exported in February last year and was down more than two million barrels below the 2020 average of 8.69 million barrels per month, the data showed. Plunge in exports month-on-month to China, India and Singapore led to lower January volumes.

Malaysia was the largest recipient of Australia’s exports in January, registering a nine-month high of 1.37 million barrels, up 33% year on year. It was also much higher than December’s 98,438 barrels.

South Korea in January saw the arrival of 1.3 million barrels of the fuels from Australia as demand for Australian condensate, or ultra-light crude, surged in the Northeast Asian country.

South Korean refiners and petrochemical makers have been making rigorous efforts to secure ample supply of condensate for naphtha and downstream propylene output, to cater to the needs of medical equipment and hygiene product manufacturers.

Demand for polypropylene and polyethylene, which are essential for making mask filters, hypodermic needles and protective medical suits and gears, will likely trend higher as vaccination program expands across Asia, according to Korea Petrochemical Industry Association and downstream market analysts based in Seoul. South Korea is a major medical device exporter in the region.

“As majority of ethylene and propylene production is sourced from light naphtha either from the refineries or condensates, the ongoing robust need for medical plastics will keep demand for condensates from suppliers such as Australia strong,” said Eshwar Yennigalla, senior petrochemicals analyst at S&P Global Platts Analytics.

Problem of plenty

Despite firm demand for medical products, traders said that refinery demand from Northeast Asia is expected to remain lukewarm in the months ahead.

“The sentiment is unlikely to recover unless all these unsold overhang barrels in the market are cleared,” said one trader.

The second-month naphtha swap crack versus the Dubai crude swap averaged minus 37 cents/b over March 1-16. The crack is down from 75 cents/b on Feb. 19, according to S&P Global Platts data.

Indonesia’s Pertamina was heard to have purchased Australia’s North West Shelf condensate and Malaysia’s Cakerawala condensate in its May 10-21 delivery tender which closed on March 3, with validity till March 5, at a premium of high $1s to $2/b to Platts Dated Brent assessment, CFR. The state-owned oil and gas company bought 650,000 barrels of North West Shelf condensate from oil major BP, and 300,000 barrels of Cakerawala condensate from ExxonMobil.

The May-loading program for Australia’s North West Shelf emerged earlier with three cargoes, stable compared to the April loading program, with BP, BHP, and Chevron holding one cargo each for May loading. BP was heard to have sold a May 5-9 loading cargo to Indonesia’s TPPI and BHP was heard to have sold a May 15-19 cargo to a regional buyer, both at small premiums to Platts Dated Brent assessments, FOB, however trade details could not be yet verified.

Robust flows to Thailand, UAE

Australia’s exports to Indonesia fell by 9% month on month to 1.18 million barrels in January after four consecutive months of gains to an 8-month high of 1.3 million barrels in December.

Exports to Thailand rose to a seven-month high of 956,428 barrels, having surged year on year and month on month from just 2,239 barrels and 335,796 barrels, respectively. Volumes to the UAE broke the half a million barrel mark for the first time in two years with 513,600 barrels, which was well above the 2020 average of 59,078 barrels per month.

Australia’s production of crude oil fell to a 12-month low of 3.58 million barrels, having dropped 10% month on month and rising 2% year on year, the data said. Condensate production, meanwhile, was at a five-month high of 6.92 million barrels, falling 5% year on year and up 4% month on month, the data says.
Source: Platts

Read More: Supply overhang may slow Australia’s crude exports revival from 11-month lows

2021-03-28 13:00:23

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy
%d bloggers like this: