- Refiners have been building secondary units that can further process the residual fuel oil from initial refining of heavy oils into gasoline and diesel
SINGAPORE: Asian refiners are buying more light crude and trimming purchases of heavy oil, as they tweak production to meet demand for low-sulfur shipping fuels.
Asia’s demand for light, low sulfur crude grades, known as sweet crude, produced by countries such as the US, UAE, Brazil and Nigeria has strengthened after the price gap between light and heavy crude narrowed amid record US shale production and heavy oil scarcity.
“The traded crude slate is getting lighter and sweeter. At the same time, expansion of the refining system is geared toward heavier crude,” Vitol’s Global Head of Research Giovanni Serio said at the Asia Pacific Petroleum Conference.
Refiners have been building secondary units that can further process the residual fuel oil from initial refining of heavy oils into gasoline and diesel. The global shift toward lower sulfur fuel for ships from January was supposed to lower heavy, high-sulfur crude prices but that has not happened.
Instead, US sanctions on Iran and Venezuela and production quotas set by the OPEC have tightened heavy oil supply.
Strong heavy crude prices have reduced the margins for secondary units, prompting refiners to trim output and process more light oil to produce low-sulfur fuel oil or marine gasoil to meet International Maritime Organization specifications.