Bullish pressure expected on Singapore refining margins

Singapore's refining margins are expected to maintain bullish pressure because South Korea's fuel oil production is dropping, and Russian oil exports also are expected to drop.

By OGJ editors

HOUSTON, Sept. 10 -- Singapore's refining margins are expected to maintain bullish pressure because South Korea's fuel oil production is dropping, and Russian oil exports also are expected to drop.

Large run cuts and lighter crude slates are combining to dramatically reduce South Korean fuel oil production this year. At the same time, the Russian government announced a 100% tax hike on fuel oil exports beginning this month.

The Boston-based Energy Security Analysis Inc. (ESAI), in the latest issue of Pacific Basin Stockwatch, reported that these factors combined will keep Singapore's fuel oil margins strong.

"Korean fuel oil production is averaging 150,000 b/d less through the first 7 months of 2002," said Rick Mueller, ESAI oil analyst. "Even though domestic demand is down this year, the greater fall in production has dramatically slashed Korean exports."

Meanwhile, the Russian government wants to build domestic stocks in order to prevent a repeat of last winter's shortages. ESAI believes falling Russian exports in the third quarter should keep fuel oil prices strong.

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