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Lawrence Yong
Singapore, July 20: Asian oil product markets has put a call to refiners in the region to extend production cutbacks, as prices of gas oil and fuel oil plunged to near 10-year low levels again, traders said on Monday.
In the absence of a supply cutback either on part of refiners or crude producers, the market will be hard pressed for a recovery this week, they said.
"The market may stabilise, you will see some bargain hunters but it will not spring back to strength easily," one trader said.
Fuel oil prices hit fresh lows last Friday at $56.00 per tonne and gas oil prices were only 40 cents off its $14.30 per barrel bottom achieved in late May.
Singapore's largest refiner Shell has already committed to run at an average of 73 per cent of its 59,000-tonne-per-day capacity in July and two of South Korea's largest refiners SK Corp and LG-Caltex are running at 80-percent capacity.
Singapore refinery margins at the basic stage have dipped into the red since late last week, refining sources said.
"We arealways looking out for cutting rates. But it's not so flexible in the short term as we have early commitments to crude and products," one source said.
Demand were not expected to give a strong showing as amid the Asian economic crisis, regional key buyers were facing a slump in import needs, traders said.
A Singapore trader, who exerted sell pressure on the fuel oil market, met minimal resistance as oil storage in Singapore were brimming due to slow moving bunker demand, sources said.
The trader, who has a track record of moving the markets, was spotted loading at least four Iranian cargoes from mid-July onward, they said.
India's award of four diesel and two kerosene cargoes per month in its term tenders late on Friday had neutral impact on the middle distillate market which is countering China's sluggish demand for gas oil, traders said.
"The axe can fall anytime on gas oil," one trader said, citing that players were watching for confirmation of widespread rumours that China will extend a ban on Singapore, July 20: Asian oil product markets has put a call to refiners in the region to extend production cutbacks, as prices of gas oil and fuel oil plunged to near 10-year low levels again, traders said on Monday.
In the absence of a supply cutback either on part of refiners or crude producers, the market will be hard pressed for a recovery this week, they said.
"The market may stabilise, you will see some bargain hunters but it will not spring back to strength easily," one trader said.
Fuel oil prices hit fresh lows last Friday at $56.00 per tonne and gas oil prices were only 40 cents off its $14.30 per barrel bottom achieved in late May.
Singapore's largest refiner Shell has already committed to run at an average of 73 per cent of its 59,000-tonne-per-day capacity in July and two of South Korea's largest refiners SK Corp and LG-Caltex are running at 80-percent capacity.
Singapore refinery margins at the basic stage have dipped into the red since late last week, refining sources said.
"We arealways looking out for cutting rates. But it's not so flexible in the short term as we have early commitments to crude and products," one source said.
Demand were not expected to give a strong showing as amid the Asian economic crisis, regional key buyers were facing a slump in import needs, traders said.
A Singapore trader, who exerted sell pressure on the fuel oil market, met minimal resistance as oil storage in Singapore were brimming due to slow moving bunker demand, sources said.
The trader, who has a track record of moving the markets, was spotted loading at least four Iranian cargoes from mid-July onward, they said.
India's award of four diesel and two kerosene cargoes per month in its term tenders late on Friday had neutral impact on the middle distillate market which is countering China's sluggish demand for gas oil, traders said.
"The axe can fall anytime on gas oil," one trader said, citing that players were watching for confirmation of widespread rumours that China will extend a ban ongas oil imports. Last week, China's premier Zhu Rongji and President Jiang Zemin raised the stakes on smuggling by setting up a National anti-smuggling police force.
"At least, buyers through Hong Kong will behave themselves a bit," one trader in Hong Kong said. "They will wait and see, let the issue simmer down."
The absence of strong Hong Kong demand will pressure Korean refiners to offer steeper discounts and may provide a lead for new round of price war, traders said.
The light end of the barrel was helped by recent unexpected secondary cracker shut downs in Singapore and Indonesia but were also not likely to retain strength, traders said.
The gasoline market was expected to be flooded come September when these crackers resume operations amid low demand, they said.
Shell's fire-hit 40,000 barrels-per-day (bpd) hydrocracker has restarted from this week and Singapore Refining Co (SRC)'s 39,000-bpd residual fluid catalytic cracker is expected back on line in mid August.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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