Demand for oil storage tanks in Singapore is increasing, a sign that Russian fuel is being blended and re-exported globally.
According to a tank operator and an executive at a consultancy that advises traders on the issue, tank space in the city-state has been eliminated due to increased interest and profits by combining supplies of cheap fuel from Russia with shipments from other sources. happening He said this process could help in obfuscating the origin of the cargo.
Singapore has not banned the import of Russian oil or petroleum products, although financial institutions based in the island state are prohibited from financing or dealing with Russian goods and companies. Singapore government agencies referred to past statements on the ban and price cap policy without further comment.
Still, the handling and trade of Russian fuel remains a sensitive issue in the region, with some buyers not wanting to be seen shopping for cargo.
Flows of Russian crude oil and fuel to Asia and the Middle East have surged since Moscow’s war in Ukraine, with Western buyers turning away in retaliation. Such shipments quickly make their way to blending and redistribution centers in the UAE, such as Singapore and Fujairah, where they can be blended, repackaged and re-exported globally. Is.
This trend of more shipments from Russia to Asia and the growing role of hubs in their redistribution could intensify in the coming weeks as Europe prepares to impose new sanctions on Russian petroleum products on February 5. Oil market participants are keeping a close eye on this. It remains to be seen where Russian fuels such as diesel, naphtha and fuel oil will find a home as many Asian countries are not taking a hard line on sanctions.
“We have seen an increase in the number of short/spot storage inquiries in the period to December,” said a spokesman for oil storage firm Advario Asia Pacific Pte. said via email. The company verifies the source of products to ensure compliance with Russian sanctions before accepting them, the person added.
A spokesperson for Singapore-based Jurong Port Universal Terminal Pte. declined to comment on specific product movements, but said the company complies with all applicable restrictions. Among other storage firms, Horizon Singapore Terminals Pte. did not respond to questions from Bloomberg, while a spokesman for Royal Vopic NV declined to comment.
Advario, Jurong Port, Horizon and Royal Vopak operate commercial tanks in Singapore. Executives at tank operator firms said six-month leases for Singapore fuel oil, or crude oil storage, rose 17%-20% in cost over the past year.
Vortexa Ltd. Singapore oil receiving terminals took more than double the volume of Russian naphtha and fuel oil in December 2022 than a year earlier, ship tracking data from the The city-state received 2.6 million barrels of naphtha, nearly 40 times the volume taken a year ago.
Arman Ashraf, global head of natural gas liquids at Singapore-based industry consultant FGE, said increased Russian naphtha arriving in Singapore tanks is likely to be re-exported to markets in Northeast Asia. He added that it is likely that hubs such as Singapore and Fujairah will continue to play a role in rebranding these barrels for distribution to their respective regions.
William Tan, senior vice-president at Singapore-based marine fuel consultancy Miyabi Industries, said traders and fuel suppliers are currently stocking up on oil and blending is likely due to “very good” profit margins from such activities. It’s a game.
He said this was due to the very cheap supply of Russian fuel oil and other products such as light cycle oil. This greatly encourages blending of these highly discounted types into compounds that can be resold at a higher price, thus forcing traders and fuel suppliers to seek onshore tanks or offshore floating storage for such plays. Encouragement to do.
According to Tan’s estimates, traders can enjoy about 20% profit by blending Russian ingredients with other grades to make a blended fuel oil product. This trend has continued since October, he added, and is higher than normal returns of between 10% and 12%. Still, there is room for margin expansion if sellers become more reluctant to offload their cargo due to higher trade restrictions.