Singapore fuel oil margins near record as crude tumbles, supplies shrink

MOSCOW (MRC) -- Asian fuel oil refining margins climbed to a near record high on Friday, boosted by falling crude oil prices and tightening supplies of the fuel amid refinery upgrades and looming U.S. sanctions on Iranian oil exports next month, as per Hydrocarbonprocessing.

"Cracks have strengthened recently mostly due to weaker crude prices which are down by almost USD10 per barrel since the start of the month," said Nevyn Nah, an analyst at consulting firm Energy Aspects. Weaker crude oil prices tend to improve margins because of the lower cost for raw materials.

Supplies of fuel oil, the residue oil left after initial crude processing in a refinery, have constricted this year. The oil product is mainly used to power large ships and for electricity generation. Refineries have cut their fuel oil output after upgrades ahead of stricter emissions regulations for ship fuel in 2020 and as exports of Iranian fuel oil, a major producer and exporter of the residual fuel, have dropped before the U.S. sanctions start on Nov. 4.

"Secondary units upgrades in Europe and South Korea, loss of low-viscosity Iranian supplies which is vital for blending West of Suez material," have all contributed to the stronger fuel oil margins, said Nah. Refinery disruptions from key producers such as Venezuela and Mexico have also tightened the availability of fuel oil.

The Singapore 180-centistoke (cst) fuel oil refining margin, or crack, for November was at USD1.43 a barrel above Dubai crude oil during afternoon trade on Friday, data on Refinitiv Eikon showed. The last time the front-month fuel oil crack was at a wider premium was in March 2003.

The more actively traded crack for barges of 380-cst fuel in Europe versus Brent crude has also soared. "The barge crack yesterday shot up pretty sharply to about minus $5.75 a barrel," said a Singapore-based fuel oil broker. The front-month 380-cst barge crack is now at its highest since September 2017, Refinitiv data showed.

Fuel oil typically trades at a discount to crude oil because it is a residual by-product. Oil prices on Friday were heading for a third weekly loss amid growing concerns of oversupply amid a slump in global equities and trade.

From 2020, International Maritime Organization (IMO) rules will ban ships from using fuel oil with a sulphur content above 0.5 percent, compared with 3.5 percent now, unless they are equipped with so-called scrubbers to clean up sulphur emissions.

The new regulations have forced the oil refining and shipping industries to prepare for the shift by making large investments to comply with the new standards.
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Borealis acquires controlling stake in South Korean compounder DYM Solution

MOSCOW (MRC) -- Borealis, a leading provider of innovative solutions in the fields of polyolefins, base chemicals and fertilizers, announces that it has signed an agreement to acquire a controlling stake in South Korean compounder DYM Solution Co. Ltd., said the producer.

The agreement and transaction are subject to all required regulatory approvals. Based in Cheonan South Korea, DYM Solution Co. Ltd. was founded in 1992 and is a provider of compound solutions for the global wire and cable industry. It specialises in semi-conductive, halogen-free flame retardant (HFFR), rubber and silane cured compounds.

With this investment, Borealis seeks to extend the global Wire & Cable asset footprint it has together with Borouge, thereby embodying the mission of Bringing Energy All Around. Borealis will be able to build upon its extensive and sophisticated portfolio, with complementary products and technologies for semi-conductive, flame retardant, rubber and silane cured compounds.

“Having access to an Asian manufacturing base would significantly expand our ability to foster continuing organic growth for Borealis and Borouge and enable us to meet the requirements of our wire and cable customers even better,” says Borealis Chief Executive Alfred Stern.


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South Korea to cut fuel tax by 15% to ease oil price burden

MOSCOW (MRC) -- South Korea will cut domestic transport fuel taxes by 15 percent for six months from Nov. 6 to ease the burden of rising global oil prices on households and small businesses, the finance ministry said on Wednesday, as per Hydrocarbonprocessing.

The gasoline fuel tax will drop by 111 won per litre to 635 won (USD0.5589) per litre. The diesel fuel tax will fall to 450 won a litre from the current 529 won per litre, the ministry said in a statement.

The government will also lower fuel taxes on liquefied petroleum gas (LPG) and butane by 28 won to 157 won per litre. The temporary tax cut will amount to a 2 trillion won (USD1.76 billion) reduction in tax revenue for the government over the next six months, the statement said.

Retail prices for gasoline and diesel have been rising for 16 straight weeks, according to data from the state-run Korea National Oil Corp, reflecting high global oil prices which now stand at just below USD80 per barrel.

As of Tuesday, the average retail price for gasoline and diesel was 1,690 won a litre and 1,495 won a litre respectively, according to KNOC data.

In the first nine months of 2018, demand for diesel eased 0.7 percent to 124.7 million barrels from the same period a year ago, while gasoline demand rose 1 percent to 60.2 million barrels, KNOC data showed
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Small Canadian LNG project set to go ahead in early 2019

MOSCOW (MRC) -- A small liquefied natural gas project north of Vancouver is poised to move to construction in the first quarter of 2019, adding momentum to Canada's efforts to become a significant exporter of the supercooled fuel, as per Hydrocarbonprocessing.

The C$1.6 billion (USD1.2 billion) Woodfibre LNG project, backed by Indonesian billionaire Sukanto Tanoto's RGE Group, would be Canada's second LNG project to go ahead, following the approval of the massive LNG Canada project earlier this month.

"We're hoping to move to a notice to proceed to construction in Q1 (of 2019)," Woodfibre LNG President David Keane told Reuters on Tuesday. "It will be sometime in February or March." Woodfibre LNG is a relatively small project at 2.1 million tonnes per annum (mtpa), but was long touted as the front runner to get Canadian natural gas to Asian markets, where demand for the fuel is booming. It was given the go-ahead in 2016, but then delayed as the company worked through a number of issues.

Keane said the project is nearly there - the company is just working with engineering contractor KBR Inc on reducing costs and awaiting a November decision on import tariffs on fabricated steel components, used for LNG liquefaction units.

"We've been very clear as an industry that there is no capability in Canada to build these large, complex modules," Keane said. "We feel that the federal government will be fair." Woodfibre also needs to finalize its benefit agreement with the local Squamish Nation, which Keane said has been initialed, but needs to be formally signed by council. He hopes that will be done by year end.

Once a construction decision is made, the project will be completed in roughly four years, ensuring first shipments of the supercooled fuel by 2023.

LNG Canada, which will produce some 14 mtpa further north in the town of Kitimat, British Columbia, has said it expects to be shipping fuel before 2025.
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U.N. shipping agency pushes ahead with tougher marine fuel rules

MOSCOW (MRC) -- The United Nations shipping agency pushed back this week on any phased entry for tougher marine fuel rules and further tightened regulations that will come into force in 2020, as per Reuters.

The International Maritime Organization will prohibit ships from using fuels with sulphur content above 0.5 percent from Jan. 1, 2020, compared with 3.5 percent today, unless they are equipped with so-called scrubbers to clean up sulphur emissions.

Ships found in breach of the new rules will face fines or the risk of impoundment by IMO member states. The shipping and oil-refining industries are scrambling to prepare for the shift and have made large investments to comply with the new standards since they were set in 2016.

Oil companies expect a jump in demand for cleaner distillates, mainly diesel, at the expense of fuel oil that would become largely redundant.

Last week, Washington said it backed a phase-in of the 2020 rules to protect consumers from any price spikes in heating and trucking fuels, although it did not seek a delay.

Some shipping associations together with the Bahamas, Liberia, Panama and the Marshall Islands had proposed an "experience-building phase", which gained support from Washington, leading to widespread market speculation in recent days about a possible review of the regulatory timeframe.

A discussion of their proposal in London this week at the IMO's Marine Environment Protection Committee, MEPC 73, failed to advance after the chair of the session said it was too vague. The paper's backers were told they could submit more concrete proposals at the next MEPC in May 2019 - especially focused on data collection and fuel oil quality.

That timeframe would, however, leave little time realistically before the regulations kick in for any potential review. The IMO has reiterated that there will be no delay in implementing the rules.

A U.S. Coast Guard official said on Thursday that Washington sought a "pragmatic" approach and would seek to develop proposals with like-minded countries for the May 2019 meeting. Some analysts including Rapidan Energy Group have suggested that major stakeholders including flag carriers were working to push back the global sulphur ban.

They also suggested that U.S. President Donald Trump's administration was likely to oppose the 2020 start date as it would cause a significant diesel, distillate and heating oil price spike in the winter of a U.S. presidential election year.
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