Gasoline Trade Through Singapore Rises

Gasoline Trade Through Singapore Rises

Insight: Gasoline Trade Through Singapore Rises

28 February, 2019
Vortexa Analysts
Vortexa Analysts

Singapore’s gasoline imports posted firm annual growth in 2018 amid higher inflows from China and Korea.

Substantial supply growth from China and Korea

Singapore imported around 16mn t of gasoline in 2018, up by over 15% on the year according to flows observed by Vortexa. A key driver of this growth was the sharp rise in arrivals from China. Intake of Chinese gasoline increased substantially, up by more than 40%, from 2017 to 2018, observed flows showed.

Substantial supply growth

source: Vortexa

Singapore’s imports from South Korea also jumped by around 50% year on year, supported by higher exports from refiner S-Oil’s 669,000 b/d Onsan refinery, and refiner Hyundai Oilbank’s 650,000 Daesan refinery, in the wake of their residue upgrading investments.

Singapore, as the main transhipment and storage hub for gasoline in the region, received higher imports especially towards the end of 2018, as surplus gasoline supplies in Asia at the time supported storage demand, underlined by the weak gasoline margins in the region.

In December, gasoline margins hit their lowest level in seven years with 92 RON Gasoline trading at -$1.44/bl under benchmark Brent crude, according to market participants. Amidst the bearish gasoline margins in the fourth quarter, domestic refiners shifted yields increasingly towards middle distillate and petrochemicals, reducing gasoline production. End-year light distillate stocks rose by 190,000t year-on-year.

Oiltanking Singapore’s terminal in southern Pulau Seraya was the biggest receiver of gasoline in Singapore in 2018. Oiltanking’s imports at the site rose by around 25% on the year to almost 3mn t in 2018, equivalent to around 18% of Singapore’s total gasoline imports last year. Meanwhile, imports at the firm’s northern site (also in Pulau Seraya) rose by around 45% to 2.4mn t over the same period.

Oiltanking claimed market share over the Vopak Sebarok and Banyan terminals in 2018, which had accounted for more than 40% of Singapore’s total gasoline during 2016-2017.

Chinese and Korean Production Surplus

The trend of increased exports, driven partly by increased refinery and residue upgrading capacities, should continue over the year, especially from China.

The 400,000 b/d Hengli refinery is currently in final testing for startup this quarter and the part Saudi Aramco-owned 400,000 b/d Zhejiang Petrochemical plant could start as early as the second quarter of this year.

Supplementing the refinery capacity growth, China and Korea also imported more US light-sweet crude throughout 2018, which has a high gasoline yield.

China’s crude imports from the US rose sharply during most of 2018 but trailed off dramatically in the final quarter (see chart). The lighter, sweeter crude diet for Chinese refineries could become a short-lived phenomenon though, if ongoing trade tensions between Beijing and Washington persist.

Chinese and Korean Production Surplus

On the demand side, Chinese demand for gasoline has slowed partly due to weaker car sales. China’s passenger car sales fell by 5.8% last year, according to the China Passenger Car Association, the first annual decline the country saw in the past twenty years. Amidst slowing economic growth and trade tensions, passenger car sales are expected to remain weak this year. The phase-out of government incentives on Chinese car sales is also capping any upside on gasoline demand growth and will boost the prospect of further exports 2019.

As a major gasoline blending hub, Singapore’s rising gasoline imports from China and South Korea has prompted higher exports from Singapore. The vast storage and blending infrastructure and the strategic location of the port means Singapore is well placed to meet the varying gasoline specifications of neighbouring deficit markets such as Indonesia, Malaysia and Australia.

Increased Gasoline Exports from Singapore

Singapore’s gasoline exports rose by around 5% year-on-year in 2018, with Indonesia and Malaysia accounting for more than 60% of total exports. Both countries’ gasoline imports increased as domestic supply growth is unable to keep pace with higher demand from their rising car population.

Exports to Australia, historically the third largest recipient of gasoline from Singapore, declined on the year in 2018 but this was partially offset by more cargoes heading to New Zealand.

New Zealand, though a much smaller importer than Indonesia and Malaysia, raised imports from Singapore by around 30% on the year in 2018. Increased appetite for gasoline, especially in the first half of the year was supported by a prolonged outage at the 115,000 b/d Whangerei refinery.

Singapore’s gasoline production more than covers domestic demand. Part of the reason behind this is the high taxation on car ownership in the country. A entry-level VW Golf will cost around 100,000 SGD ($74,000) – more than triple the cost of a similar car in Germany.

As a result, the international cargo trade volume of gasoline through Singapore dwarfs the actual domestic consumption on the island. Singapore has three refineries; ExxonMobil and SRC’s facilities on Jurong Island and Shell’s Pulau Bukom Refinery. Between them they have a combined capacity of around 1.4m b/d.  

Singapore’s importance as a trans-shipment, storage and blending hub for gasoline will be strengthened by rising Chinese exports and robust supplies from Taiwan and Korea in the years to come.

Vortexa Analysts
Vortexa Analysts