Asia’s biggest processors of oil are helping the region cook with its own ingredients and shun products that are made elsewhere.
From Japan’s JX Holdings to PetroChina and India’s Reliance Industries, Asian refiners are feeding the region’s growing demand for everything from cooking gas and plastics to car-fuel additives, according to industry consultant FGE. That’s leaving producers in the Middle East and the US looking to ship supplies to Asia with lower sales as the region’s higher processing rates drag down imports.
“Refinery runs have been exceptionally high and there is so much availability in the region,” said Sri Paravaikkarasu, a Singapore-based analyst at FGE. “It is not that easy to clear the surplus in the market. The scale of the problem is bigger than people thought. We will definitely see increased pressure on suppliers to Asia.”
The volume of liquefied petroleum gas, used as cooking fuel, shipped to Asia has dropped to 6.5mn metric tonnes in January to August this year, compared with 7mn tonnes in the same period in 2015 as Asian output has surged, according to shipping data compiled by Bloomberg. Companies in the region have decided not to take delivery of six US propane cargoes totalling 264,000 tonnes in August, according to Scott Gray, an analyst with industry consultant IHS in Houston. That’s after they cancelled plans to load about 352,000 tonnes in July, he said.
China’s output of LPG, commonly used in culinary blowtorches and plastics production, has surged to the highest level in more than a decade as refineries ramp up operating rates amid lower oil prices and a relaxation on crude import rules for private
processors.
Shipments of naphtha, used as a petrochemical feedstock, heading to Asia from Europe and North America combined have declined to the lowest level since at least November 2013, when Bloomberg began compiling the shipping data. South Korea’s imports averaged 15.3m
n barrels in the first half of 2016, the lowest for those six months since 2011, according to data compiled from Korea National Oil Corp Domestic output of the fuel rose to a record 25mn barrels in February. Crude-processing volumes in China, the world’s biggest user of energy, soared to record highs in both June and the first half of this year. The nation’s refiners consumed 45.08mn tonnes in June, or a record 11mn barrels a day, according to data released by China’s National Bureau of Statistics on July 15.
“In the Asian picture, basically it’s all driven by China,” said Suresh Sivanandam, senior manager of refining research at Wood Mackenzie in Singapore. “Although they were importing, the Chinese refiners have also increased their supply.”