With demand weak, traders storing gasoil in vessels off Singapore

Traders are temporarily storing gasoil in vessels off Singapore as inventories of the oil product climb amid weak demand in Asia, sources familiar with the matter said on Friday.

Storing of gasoil in vessels is unusual as it is typically more expensive than keeping the oil product in onshore storage tanks.

But with tanks in Singapore filling up fast due to weak regional demand, some vessels containing gasoil are facing delays of nearly a month to discharge the cargoes at ports in the city-state, traders said.

“Quite a few companies have not been able to discharge at the ports because of high (inventory) in Singapore,” a Singapore-based trader said.

“The market’s been under a lot of pressure and most of these North Asian cargoes are heading to Singapore to be stored as arbitrage to Europe from Asia doesn’t work.”

At least four long-range vessels chartered by Vitol, Trafigura and Total have been facing delays of up to 25 days to discharge gasoil at ports in Singapore this month, traders said.

One of them is the Swarna Kamal, which was chartered by trader Vitol to load 500 parts-per-million (ppm) sulphur gasoil from Mailiao, Taiwan in mid-September.

The vessel entered Singapore waters on September 22 and only berthed at Tanjung Pelapas, Malaysia, on October 16, according to Reuters freight fundamentals database.

Another vessel called Dubai Beauty, which was chartered by Total, entered Singapore waters on October 10 and is still waiting to discharge the oil product, an industry source said.

Trafigura has had two long-range-sized vessels containing both high and low sulphur gasoil waiting to discharge for about 20 days, industry sources said.

Vitol could have another two vessels also facing delays in discharging gasoil, a trader said, although this could not be confirmed.

Singapore onshore gasoil and jet fuel stocks rose to a one-month high of 11.561 million barrels in the week to October 15, latest data from trade agency International Enterprise showed.

Storage space is not completely full in Singapore and southern Malaysia and the price difference between prompt and forward months is not enough to cover storage costs, so traders were a little puzzled at the need for offshore storage.

The companies could be storing gasoil offshore as their own tank space could be full and they might not want to make public that they have additional gasoil unable to find homes, one Singapore-based trader said.

The Asian gasoil margin is set for its worst quarter since late 2010, Reuters data showed. Demand for the industrial and transport fuel slowed down tremendously this year in Asia due to weakening economies, while new refining capacity contributed to a surplus of the fuel.

The fourth quarter of the year is traditionally when demand for the fuel picks up as it is used for heating during winter in Europe. But this year demand has failed to materialise.

Increased supply of Indian and Middle East gasoil cargoes due to weak demand and new refining capacity mean that traders will prefer to ship the cargoes from there instead of from North Asia to save on freight costs, industry sources said.

“It’s probably better to keep the product in tanks and wait for oil prices to go up as well so that the traders don’t lose too much money,” a Singapore-based trader said.

As of Thursday during Asian trading hours, Brent crude had fallen more than 28% since June, but it recovered slightly on Friday. – Reuters, October 17, 2014.
Source: The Malaysian Insider