Asia/Pacific News
South Korea Refiners Turn to Spot Bunker Market to Top Up Low Production Levels
In a bid to offset lower production volumes, South Korea's two smallest refiners, Hyundai Oilbank and S-Oil Corporation, have bought spot bunker fuel oil cargoes, Reuters reports.
Refiners in the region have been forced to cut run rates due to weak margins and tepid demand, hoping to reduce the oversupply of global diesel fuel.
"S-Oil used to export their cargoes, but this time they are importing for bunker use. That's interesting," said one South Korea-based marine fuel oil trader.
While this is the first time this year that Oilbank has imported fuel, it is the first time S-Oil has ever imported fuel.
According to another South-Korean trader, S-Oil had been struggling with poor margins for three to four months before turning its attentions away form bunker fuel and towards upping production of asphalt, which has seen increasing demand.
The company cut its run rate five percentage points to 90 percent earlier in September.
Bunker fuel production at Hyundai Oilbank was reported to have also declined by up to 30,000 tonnes per month after the company reduced run rates.
"Oilbank doesn't produce fuel oil nowadays. Theoretically, all the fuel oil from the CDU (crude distillation unit) is used as feedstock for their secondary units," one source said.
S-Oil and Oilbank each bought 50,000 tonnes of bunker fuel for October, according to traders.
Late last year Oilbank also bought 1 million tonnes of 80 cSt bunker fuel from Mitsubishi Corporation.
