Vietnam’s oil products, LPG demand and sales slide in Q1 on COVID-19 measures

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Highlights

Oversupply leads to limited storage

Buyers retreat, expecting further price fall

Dung Quat refinery customers reduce purchases

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Vietnam’s oil product and LPG demand has plummeted in the first quarter due to measures taken to contain the coronavirus outbreak, leading to bulging and storage , officials from state-run oil companies said.

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This has made it difficult for refiners Dung Quat and Nghi Son to sell fuel in the domestic market, as customers receiving cargoes, an official with Vietnam National Oil and Gas Group, or PetroVietnam, told S&P Global Platts recently.

Retail stations are hesitant to up and buy transport fuels because they are waiting for further price falls, he added.

“Currently, stockpiles at Nghi Son are very high, accounting for about 70%-85% of their storage capacity, and are expected to be fully filled by the end of this month,” a refinery official said.

Stockpiles at Dung Quat are also rising fast, as customers delay receiving cargoes.

PetroVietnam’s oil product business is projected to face more difficulties if the COVID-19 is not controlled in coming months, the official said.

Binh Son Refining and Petrochemical, or BSR, operator of Dung Quat and affiliate of PetroVietnam, said in a statement last week that its customers have reduced purchases by some 30% versus the year-ago period on low consumption following the pandemic.

According to 2020 term contracts, Dung Quat is slated to deliver 634,000 cu m of refined products to domestic customers and fuel distributors each month, including 302,000 cu m of gasoline, 272,000 cu m of diesel, and 60,000 cu m of jet fuel.

But with customers delaying receiving cargoes, stockpiles are rising, forcing it to stock in other companies’ storage as its tanks are going to be filled up soon.

To adapt to falling demand and sales, Dung Quat was forced to reduce run rates, BSR said, without providing details. A BSR official told Platts that rates will be cut to 100% from 105% if stockpiles are too high.

BSR has also decided to postpone the total maintenance shutdown of Dung Quat refinery to last from June 27 to August 17, from June 12 initially, an official from another state firm said.

Since the start of the month, the price of FOB Singapore 92 RON gasoline, the most liquid gasoline benchmark in Asia, has shed more than 60%, to a 12-year low of $20.80/b at the close of Asian trade Wednesday, Platts data showed. It recovered marginally to $21.10/b a day later.

PROMPTS EXPORTS

The glut and sluggish domestic demand prompted some refiners to export surplus products to help ease the build-up. Platts reported in February that Vietnam’s Nghi Son Refinery & Petrochemical LLC, or NSRP, issued a tender to sell its first-ever spot cargo of 50 ppm sulfur gasoil, totaling 40,000 kiloliters, or around 251,000 barrels, for February 22-25 loading. NSRP has since offered similar gasoil volumes for March and April loadings.

Incremental gasoil flowing into the spot market amid anemic demand pressured down prices, traders said.

At the Asian close Thursday, the differential for FOB Singapore 10 ppm sulfur gasoil fell to near 15-month lows of minus 47 cents/b to the Mean of Platts Singapore gasoil assessments.

Lower tourist arrivals, more countries implementing travel bans and flight restrictions in a move to fight the COVID-19 spread, has prompted Vietnam — which relies on imports to meet most of its jet fuel requirements as domestic refineries focus on production of other transport fuels — to slash monthly jet fuel imports. Vietnam Customs data showed that jet fuel imports for February tumbled 41.18% on the month to a 17-month low of 149,717 mt.

At the Asian close Thursday, the FOB Singapore jet fuel cash differential hit an 11-year low of minus $2.52/b to the MOPS jet fuel assessments.

Regional LPG prices have also been dampened by poor demand from China due to outbreak- measures and ample from the Middle East, with CFR North Asia propane plunging to near two-decade lows of $185/mt on March 24. It later recovered with the resumption of Chinese buying as industries return from mandated shutdowns.

“Our sales have been running at minimum speed since right after Tet Lunar New Year until now and other importers suffer the same bad situation,” the second official said.

“We always suffer high inventory and once the state adjusts down retail prices every 15 days, we receive a new level of losses incurred to unsold inventory. Since beginning of this year until now, we have decreased our term contract’s volume received from Dung Quat,” he said.

State-run Saigon Petro has seen gasoline and diesel demand fall by at least half, while sales volume by more than 40%, he added.

Saigon Petro’s LPG business has also been hit after the Vietnam- border was closed for re-export to control the spread of the disease. The source could not reveal the monthly volume of LPG re-exported to .

Source: Platts

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