News Code : 44883


Petrotahlil - South Korean bitumen cargoes from late April to July have hovered at a $62.50/t premium to fob high-sulphur fuel oil (HSFO) on average amid limited regional supplies.

Premiums on South Korean cargoes in recent tenders continue to remain high in a $60-65/t range and have climbed to as high as $75-80/t, even as fuel oil prices firm with seasonal summer demand.

South Korean refiner GS Caltex sold two August-loading cargoes via an export tender from its 790,000 b/d Yosu refinery. The tender, which traded on 14 July at a $76-80/t premium to 180cst HSFO, translates to $325-330/t fob South Korea. Trading firm Vitol and Chevron were awarded the cargoes, with volumes likely moving to southeast Asia. Fellow South Korean refiner S-Oil had concluded on 7 July five August-loading export cargoes from its 580,000 b/d refinery at Onsan also at premiums at $76-80/t, translating to $325-335/t fob.

S-Oil had on 24 April sold three May-loading export cargoes at a $50/t premium, which translated to around $184-185/t fob.

Average tenders concluded a year earlier were at a premium to 180cst HSFO of only $1/t fob. A tender issued by S-Oil on 22 April 2019 sold at a steep discount of close to $17-18/t. Demand at that time was seasonally slow in China amid monsoon weather disruptions and sufficient inventories.

East China is typically the largest buyer of South Korean cargoes because of its proximity and freight economics. But seasonal monsoon rains means buying interest has remained weak compared with southeast Asia. This has prompted trading firms to move South Korean cargoes to southeast Asia, including at least two cargoes into Vietnam where buying remained firm after easing of its Covid-19 lockdowns.

Premiums have remained high because of increasingly tight bitumen supplies coupled with steady demand from southeast Asia. The 290,000 b/d Jurong refinery of SPC, the Singapore-based subsidiary of Chinese state-controlled PetroChina, and Malaysia's state-owned Petronas have moved to cut bitumen production as Covid-19 related lockdowns has affected construction activity. ExxonMobil's bitumen production in Singapore for the rest of this year remains unclear, causing a supply gap particularly for its term buyers.

South Korean refiners had also reduced bitumen output ahead of the International Maritime Organisation cap on sulphur in marine fuels that came into effect on 1 January year.

Hyundai Oilbank in 2018 built an 80,000 b/d solvent deasphalting unit at its 520,000 b/d Daesan complex, allowing it to process residual oil to make high-value products such as gasoline and diesel. SK Innovation has built a new vacuum residue deslphuriser at its 870,000 b/d Ulsan refinery that may tighten bitumen supplies because of its increased production of low-sulphur fuel oil and light oil products.

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Source : Argus


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