Singapore Refiners Reap Rich Returns, Set To Raise Output

Singapore refiners are enjoying their best returns in about a year and are poised to raise output to maximum in the face of low crude prices, industry sources said on Thursday. The last time margins (profit) were this high it was back in the first quarter of 1996, a refiner said.

Refining profits in recent days have soared to around $2 a barrel of Middle East crude refined at the basic stage compared to a loss of more than $1 in January. The surge in profits was due to a $4.50 per barrel fall in prompt Brent crude futures prices to $19.12 earlier this week from $23.58 on January 8. Traders said crude was not likely to trade above the technical $20-level for some time as the market enters a period of low demand.

 

The improvement in profits prompted Singapores largest refiner, Royal/Dutch Shell Group, to raise output back to its full 435,000-barrels-per-day (bpd). Shell reduced output by 30,000 bpd on January 17. Esso Singapore is the only refiner on the island that has yet to raise output. Esso had cut runs by 20 to 25 per cent at its 230,000-bpd plant the weekend of January 18. An Esso spokeswoman said the company was still monitoring the situation. Sources said with such high margins, it was only a matter of days before Esso raised output to maximum. The Singapore refiners good fortune was also in part due to an unexpected shutdown of the 125,000-bpd Balongan refinery in Indonesia.