MOSCOW (MRC) -- Oil markets in Asia are bracing for further growth in exports from Kuwait's newest Al Zour refinery as the complex started up its third and final crude distillation unit (CDU) this week, with trade sources saying the full impact was likely to be felt later in the third quarter as it ramps up operation, said Hydrocarbonprocessing.
The refinery, which first started commercial operations in November 2022, is one of several major facilities globally bringing capacity online this year, with higher production and exports of oil products expected to weigh on refining margins.
With Al Zour operational, Kuwait's exports of refined products, including fuel oil, diesel, jet fuel and naphtha, hit a monthly record high of 2.8 million metric tons in June, data from analytics firm Kpler showed. Al Zour has been stepping up its fuel oil tenders since end-2022, with a significant share of its products landing in Asia and the Middle East and putting margin pressure on rival refiners.
Most of the very-low sulfur fuel oil (VLSFO) exports were headed to key bunker and transfer hubs Singapore and UAE's Fujairah, based on Refinitiv and Kpler ship tracking data. For jet fuel, Al Zour's exports have averaged 50,000 tons to 200,000 tons per month since the start up of the first CDU at the end of 2022, with cargoes mostly headed to northwest Europe, the ship tracking data showed.
However, these are likely contract cargoes, two refinery sources with knowledge of the matter said, meaning they are unlikely to have put pressure on spot markets. Meanwhile, gasoil exports were mostly headed to Europe or Africa, the data showed, also easing Asian market impact. Still, market participants in Asia and industry watchers are keeping watch on whether Al Zour sustains or raises export volumes to Asia in the nearer term.
We remind, Kuwait Integrated Petroleum Industries Company’S (KIPIC) distillation unit 21 at the al-Zour refinery has come online, paving the way for the refinery to operate at full capacity. Kuwait's oil minister said that his country hopes to have a higher oil production quota when it ramps up capacity, and that Kuwait remains committed to OPEC decisions.