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Seoul: South Korean refiners will keep July crude runs steady from June as negative fuel oil cracking margins discourage them from lifting runs after heavy maintenance last month, a Reuters survey showed on Tuesday.
The four refiners - SK Energy, GS Caltex, S-Oil Corp and Hyundai Oilbank - are expected to run 2.25 million to 2.26 million barrels per day (bpd) in July, steady from June, but falling from 2.43 million bpd in May.
On top of the weak margins, the refiners are faced with high jet fuel stocks, hurting the market's premiums on South Korean cargoes, trading sources said.
The region's simple refining margin, which measures the value of oil products derived from the first round of crude distillation, was at minus $4.56 a barrel on average over the past five days, falling from minus $3.13 average in June.
The complex refining margin, which considers products from secondary cracking, was at $4.61 a barrel on average for the past five days, down from $6.65 average last month, reflecting the current sluggish demand for middle distillate products.
"High jet fuel inventories and the negative fuel oil cracks are trouble factors for refiners who have resumed operations after maintenances," said a refinery source.
South Korea's top refiner SK Energy raised July crude runs to 800,000 bpd, up around 50,000 barrels from June, but the increase was lower-than-expected because of the weak margins, Seoul-based refinery sources said.
SK Energy's No.1 and No.5 crude distillation units (CDUs), with total capacity of 320,000 bpd, had finished maintenance works over the past one week. But its No.1 and No.2 Incheon CDUs, which run a total 275,000 bpd of crude at full capacity, have just been taken offline for turnarounds.
S-Oil Corp, the country's third-largest refiner in terms of size, but equipped with the most complex units to produce more expensive lighter products, has cut its runs to around 500,000 bpd, down 50,000 to 60,000 bpd from June. It is running at 86 per cent of its full capacity.
Due to the supply glut, South Korean jet fuel cargoes are valued at discounts of about $1 a barrel to Singapore spot quotes.
numbers
demand to slow down
The IEA report said the world's estimated daily oil needs would rise from 86.87 million barrels this year to 94.14 million barrels in 2013 - less than anticipated in its 2007 report because of skyrocketing prices.
Tanaka said that tight supplies, despite a price surge that would normally lead to increased availability, came as a "shock". His comments reflected the high-level bedevilment at the meeting about what is causing prices to sizzle.
- AP
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