Singapore Refinery Profits Crash to two-year low as Naphtha joins Glut

Singapore’s oil refining profits dropped to two-year lows on Wednesday, in the latest sign that the industry is pumping out too much fuel for the market to absorb. Refinery margins in Singapore, the Asian benchmark, fell to $2.94 per barrel on Wednesday, down over 70 percent since January and its lowest level since August 2014.

The glut was triggered by an oversupply of gasoline and diesel, but it has since spread to naphtha, a light distillate product mainly used as a petrochemical feedstock but which can also be blended into gasoline supplies. Singapore’s margins for naphtha have crashed 88 percent this year to $17.15 per tonne, a sharp decline from $190 just two years ago and well off its long-term average of $103 per tonne.

As a result of the glut, Singapore’s light distillate inventories have swollen by over 2 million barrels since late June to 15.1 million currently, a near record level, as refiners put unsold fuel into storage. Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore, said once all storage possibilities had been exploited, refiners would have to cut back their crude processing runs and instead start selling down fuel from storage.

“Once the product tanks are full…, then you know that the situation is bad. You have to cut runs,” he said. Many refiners, however, are reluctant to cut runs as long as they make some cash.

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