S Korea East West Power launches several tenders to purchase LSFO
Japan continues its search for heavy unsulphurized crude
South Korea’s first quarter LSFO imports reach 12.2 million barrels
Utilities in Northeast Asia are expected to expand their search for more oil for power generation amid tight natural gas and LNG supply, as South Korean utilities launch several tenders for fuel oil, while Japanese electricity suppliers continue to seek out any available direct-fired crude oil. In the region.
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Low availability of spot LNG export cargoes in Malaysia and Indonesia, coupled with Panama Canal restrictions and ice conditions in North Asian ports, contributed to the supply crisis of LNG in Northeast Asia in recent weeks.
As a result, the tightening of LNG stocks has prompted Northeast Asian electricity suppliers to secure, by any means necessary, other sources of electricity generation and industrial raw materials to meet a demand. high demand for winter energy.
South Korean utility East West Power recently put out a tender for 27,000 tonnes of LSFO to be delivered in late January to Ulsan after purchasing two cargoes in December 2020, more than their usual sporadic purchases.
Unlike Japan, kerosene represents very little of South Korea’s overall source of heating energy during the winter. Households and the commercial sector of the latter depend mainly on gas and electricity for winter heating.
However, the tight supply of LNG is likely to cause South Korea to increase its reliance on fuel oil for power generation in the winter during cold spells in the first quarter.
South Korea is estimated to have imported around 11 million barrels of fuel oil in the fourth quarter of 2020, up 62.7% from 6.76 million barrels received in the same period a year earlier and shipments could reach about 12.2 million barrels in the first quarter, up 38.2% from 8.83. million barrels imported in the first quarter of last year, according to major South Korean electricity providers and refiners polled by Platts.
South Korea’s thirst for power-generating oil is very much in line with Japan’s latest rush to increase fuel oil imports. Chugoku Electric and Kansai Electric have decided to import fuel oil or heavy crude in addition to their domestic purchases amid falling LNG stocks and a tightening balance between electricity supply and demand, a Platts reported earlier.
Japan’s electricity demand increased 13% year-on-year in the first week of 2021, averaging 108 GW, the 3.5% increase in December also supported by cold weather, S&P said Global Platts Analytics.
South Korea’s electricity demand has hit a winter high and the Korea Power Exchange, or KPX, is on high alert. Temperatures in Seoul dropped to minus 18.6 degrees Celsius in early January, the lowest in 35 years, according to the Korea Meteorological Administration.
Crude direct combustion
Japanese refiners are struggling to produce enough fuel for the country’s power companies, which could also lead to a brief increase in its rapid imports of heavy crude, industry and market sources said.
Japanese power companies once used grades of heavy sweet Indonesian crude like Minas, Cinta and Duri for power generation.
There has been a surge in requests to purchase spot heavy heavy crude from Japanese utilities in Indonesia and Vietnam in recent days, according to a trade source of oil and crude oil from a trading company. integrated Japanese with in-depth knowledge of the subject.
Some Japanese and South Korean electric utilities are even considering purchasing quick shipments of soft Australian heavy crude like Van Gogh for direct combustion as they are likely to have difficulty finding heavy cargoes of soft crude available for the second half of January from Southeast Asia, the source says.
“Australian grades are actually premium oil … too expensive for direct combustion. However, if the energy supply is desperately tight, they [power utilities and trading firms] may have little choice but to choose fast Australian cargoes, if these are available in the secondary market, ”said a Singapore-based low sulfur crude trader with extensive oil trading knowledge for power companies in Northeast Asia.
Several regional grades of mild heavy crude have seen their spot price spreads increase in recent trading sessions, supported by the recent surge in direct-fired oil needs of traders and energy sectors in North Asia. East.
Indonesia’s soft heavy duri crude was valued at a premium of $ 4.80 / bbl to Brent dated Jan. 18, the highest spot differential since $ 4.85 / bbl on Sept. 7, 2020, according to data by Platts. Australian crude Vincent was valued at a premium of $ 10 / bbl on January 18, the highest heavy candy grade since reaching $ 10.10 / bbl on December 16 of last year.