Singapore Storage Operators Will Be Ultimate Losers in Asia's Changing Oil Market, says Analyst

by Ship & Bunker News Team
Wednesday August 26, 2015

Citing June's major trading play that yielded only modest returns, Thomson Reuters Oil Research and Forecasts predicts that storage operators could be the ultimate losers in Asia's changing fuel oil market, Tank Storage Magazine reports.

Yaw Yan Chong, director of the research organization, was quoted as saying, "Storage operators could ultimately lose out as they work within a challenging environment despite the recent major trading play."

Chong is referring to the 6 million metric tonnes (mt) of mainly 380 cSt grade cargoes traded in June, with Litasco and Totsa said to be the main sellers, and the buyers to have included Glencore, PetroChina, Mercuria, and BP.

Expectations of solid returns evaporated in July, when global crude benchmarks plunged, and according to Thomson Reuters, the buyers suffered a loss of about $45-$50 per metric tonne (pmt) to the estimated average purchase price of $360 pmt.

Since then, the buyers have been obliged to secure short-term, shore-based capacities as well as floating storage – which in turn is said to have driven up spot charter rates to 2008 levels.

Thomson Reuters noted that with a poor demand outlook, "one casualty could well be the storage operators - which have thrived in Singapore's past 20 years as Asia's primary oil-trading hub and seen capacities grow to nearly 15 million m3 on both sides of the Johor Straits."

"The environment has become increasingly challenging for storage operators, as much as it has been for the fuel oil trading community," Thomson Reuters concluded, adding that it stands by its belief that the fuel oil market "is headed for a fundamental change in the way that it trades and makes money."

Thomson Reuters predicted fundamantal change earlier this month, partly in reaction to Singapore's stagnant marine fuels market which for the past three years has seen volumes hovering at around 42 million mt per year.