Asia's refiners face profit crunch as Kuwait cuts crude exports

MOSCOW (MRC) -- Asian refiners are on the hunt for crude oil to replace Kuwaiti supply as the OPEC producer cuts exports by nearly a fifth to feed its huge new refinery, which is driving up prices for other sour crudes and likely to squeeze profit margins, said Hydrocarbonprocessing.

Lower Kuwaiti exports follow cuts from OPEC kingpin Saudi Arabia that have pushed Brent prices close to USD90 a barrel and left little wriggle room for Asia's refiners, reliant on the Middle East for more than two-thirds of crude imports.

Chinese refiners, which have invested heavily in new plants designed to process sour oil, are especially exposed. Discounted oil from Russia has eased some of the pain, replacing some Kuwaiti supply, largely to China and India.

But most of Kuwait's customers will have to pay up for similar quality oil from other suppliers such as Saudi Arabia, Iraq and the United Arab Emirates or buy more expensive sweet grades from other regions. "Saudi Arabia and the UAE are the top contenders for filling the supply gap in the Middle East due to their production and export of medium sour barrels," said Janiv Shah, an analyst at consultancy Rystad Energy.

"It is improbable that they will be able to entirely meet the demand." Sustained output cuts from OPEC producers and their allies and new refining capacity designed to process sour crude could lead to tight supply until the end of 2024, Energy Aspects analyst Sun Jianan said.

Kuwait's crude shipments shrank by about 10% to 1.61 million barrels per day (bpd) in January-July from the same period in 2022 as its Al Zour refinery ramped up, according to Kpler data. Exports to Taiwan, China and India dropped more than 17% during the same period, while volumes for Pakistan, the Philippines and Thailand fell to zero, the data showed.

In the second half, Kuwait will reduce its exports by up to 300,000 bpd, down 18% from the first half, as it diverts supply to the 615,000 bpd Al Zour plant, which cranked up its third and final crude distillation unit (CDU) in July, according to consultancies FGE, Energy Aspects, Rystad Energy and S&P Global Commodity Insights.

Additionally, Kuwait's joint venture 230,000 bpd Duqm refinery in Oman is scheduled to start operation by end-2023, which could reduce Kuwaiti crude exports by a further 100,000 bpd to 200,000 bpd in 2024, the consultancies said.

Kuwait Petroleum Corp (KPC) has notified buyers that volumes could fluctuate each month and could be further reduced once Al Zour is at full operation, a source familiar with the matter said. KPC did not respond to Reuters' inquiry seeking comment.

We remind, U.S. motorists hoping to squeeze out one last trip before the Labor Day holiday and school begins are finding pump prices that have surged to their highest level this year on tighter gasoline supplies. Consumers tend to get a break from steeper fuel costs as peak vacation travel ebbs.


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MOSCOW (MRC) -- China's exports of fuel products more than doubled in July from a year earlier, data showed on Friday, as refiners maintained high run rates and took advantage of strong export margins, said Hydrocarbonprocessing.

Exports of diesel, the biggest fuel by share of refinery output, totaled 910,000 metric tons, up 153.1% on last year's 360,000 tons. Total diesel exports for the year so far are up 247.1% on last year. Weakness in the country's property and merchandise export sectors, visible in recent data showing sharply contracting new construction starts and sliding sentiment in the manufacturing sector, has weighed on domestic diesel demand.

Gasoline exports rose 39.0% to 1.22 million tons from 880,000 tons in July last year. This is despite strong domestic demand for gasoline, which has picked up with the arrival of the summer travel season.

Domestic gasoline inventories fell around 3% between mid-June and mid-July, according to data from China-based consultancy Longzhong.

Jet fuel exports reached 1.47 million tons, up markedly from 480,000 tons a year earlier, though China-related international aviation traffic continues to trail a healthy domestic flight market. Sales of kerosene to international flights are included in this export figure.

China's total monthly refinery throughput reached the third highest level on record in July. Total fuel exports, which also includes marine bunker fuel, surged 55.8% on last year to reach 5.31 million tons in July, customs data previously showed.

We remind, China made a rare draw on crude oil inventories in July as imports softened and refinery processing remained elevated to meet rising domestic demand and a surge in refined fuel exports. Refiners used about 510,000 barrels per day (bpd) from stockpiles in July, the first time in 33 months that they had dipped into storages.

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MOSCOW (MRC) -- Thailand-based packaging producer Indorama Ventures has inked a deal with AMB to drive circularity in PET food tray packaging, said the company.

The companies intend to manufacture recycled polyethylene terephthalate (rPET) flakes by recycling PET food tray packaging. These high-quality rPET flakes can then be used for producing new food packaging trays, contributing to a circular economy system.

This collaborative effort is set to help the companies divert more than 50 million post-consumer PET trays from reaching landfills by the end of 2025.

Indorama’s deputy group CEO and Combined PET executive president DK Agarwal said: “Each new partnership with sustainable packaging leaders like AMB smooths the path towards a circular economy for PET trays and extends the PET life cycle. This means we use less raw materials while the process results in less waste and emissions.”

Indorama will use its recycling technology and expertise to produce rPET flakes using post-consumer trays at its facility in Verdun, France, and then supply them to AMB for manufacturing food-grade transparent film.

The process will further increase the overall recycled content obtained from trays in AMB’s final products.

We remind, Carbios and Indorama Ventures have announced a non-binding Memorandum of Understanding (MOU) for a joint venture to build the world's inaugural PET biorecycling plant in France.

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MOSCOW (MRC) -- Neste Corp. (Espoo, Finland) has entered a cooperation with Suntory, ENEOS Corp. (Tokyo, Japan) and Mitsubishi Corp. (Tokyo) to enable the production of PET (Polyethylene Terephthalate) resin made with renewable Neste RE on a commercial scale, as per Chemenonline.

Neste RE is Neste’s feedstock for polymers production, made 100% from bio-based raw materials such as waste and residues, e.g. used cooking oil, to replace fossil feedstock in the value chain. Japanese beverage company Suntory will utilize the renewable PET resin to produce bottles for its products in 2024.

A new partner for Neste in Japan, ENEOS will use bio-intermediates based on Neste RE to produce bio-PX (Bio-Paraxylene) at its Mizushima Refinery in Okayama, Japan. The bio-PX will then be converted to PTA (Purified Terephthalic Acid) and subsequently to PET resin for Suntory to use to manufacture their PET bottles. Mitsubishi Corporation will be coordinating the collaboration between the value chain partners.

“In order to tackle the imminent climate crisis and its consequences, companies are required to take responsibility now. Through partnering along the value chain, Neste can contribute to reducing the polymers and chemicals industry’s dependence on fossil resources as well as to manufacturing of products that have a lower carbon footprint,” says Lilyana Budyanto, Head of Sustainable Partnerships APAC at Neste Renewable Polymers and Chemicals business unit.

We remind, Braskem S.A. (Sao Paulo, Brazil) and SCG Chemicals plc (SCGC; Bangkok, Thailand) have signed a joint venture (JV) agreement to create Braskem Siam Company Limited. Subject to clearance from the relevant anti-trust authorities and final investment decision by the partners, this joint venture aims to produce bio-ethylene from bio-ethanol dehydration and to commercialize I’m green TM bio-based polyethylene (PE), using the EtE EverG reen TM technology. The technology results from the partnership agreement between Lummus Technology LLC and Braskem B.V. to develop and license this technology.

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MOSCOW (MRC) -- Spot discounts for Russian crude for September loading have started to deepen as India, a key customer of Moscow, reduces purchases due to high prices and maintenance outages at some refineries, four traders and Indian refinery officials said, asper Reuters.

India is the top buyer for Russian Urals crude this year and slowing demand from the world's third-largest importer could push more supply to China instead. Spot discounts for September loading of Russia's flagship grade Urals for delivery at Indian ports have widened to about $6 per barrel from an average USD5 for August, the trade sources said.

However, Indian refiners are waiting for discounts to widen to at least $7 per barrel, sources at three state refiners said. "We have not placed a request for September cargoes as the discount is not attractive ... it is still below $7 per barrel," a refinery official said.

Two traders said discounts are unlikely to widen further. Prices for Russian oil jumped for August barrels following Moscow's pledge to cut exports as a part of the OPEC+ deal, cooling demand from Indian buyers.

India's top refiner and a key buyer of Russian oil, Indian Oil Corp (IOC), is staying away from the spot markets for Russian oil and is meeting most of its demand through supplies in its term contract, a separate source said. The traders and the refinery sources declined to be named as they are not authorized to speak to media.

IOC did not immediately respond to a request for comment. At least two Indian refiners, Mangalore Refinery and Petrochemical Ltd and Reliance Industries, have scheduled maintenance on plants during September, which would cut their crude purchases.

MRPL Managing Director Sanjay Varma told Reuters that his company would cut purchases this month and next due to a maintenance outage for about 40 days at a 60,000 barrels per day crude unit. Reliance is shutting half of its export-focused 704,000 bpd plant for maintenance.

In China, some big private refiners, which earlier in the year bought Urals supplies, are looking at buying September-loading cargoes via state traders as intermediaries, said a trader familiar with the situation. "These big private refiners buy mostly non-sanctioned oil, but still, Urals are about USD6-8 dollar cheaper (for delivery at Chinese ports)," the trader said.

Despite widening discounts, the calculated Urals oil price remains above the USD60 per barrel price cap applied by the Group of Seven countries (G7) and the West. As of Thursday, calculated Urals oil price on FOB basis in Baltic ports was close to USD66 per barrel given the cost of freight and additional costs of USD2 per barrel.

We remind, Russia's seaborne diesel and gasoil exports rose by 7% to about 1.7 million metric tons in the first 14 days of August from the same period in July on strong production volumes after seasonal refinery maintenance eased. In August so far, Turkey remains the top destination for diesel exports from Russian ports, taking about 42% of total supplies, or nearly 720,000 metric tons. Diesel loadings from Russia to Brazil totaled about 140,000 metric tons since the start of this month.

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