Abu Dhabi National Oil Company (ADNOC) will from 2019 reduce its exports of a type of fuel oil prized by the market as a refining feedstock, adding to tightening global supplies of the oil product, said three trade sources on Monday.
Exports of straight-run fuel oil (SRFO), the residue oil left after initial crude refining, will stop next year as ADNOC has nearly finished repairs to the 127,000 barrels-per-day (bpd) residue fluid catalytic cracker (RFCC) at its Ruwais refinery that processed the SRFO into higher-value products such as gasoline and diesel fuel.
ADNOC shut the RFCC after a fire at a petrochemical plant linked to the unit in January 2017. Ruwais can process 800,000 bpd of crude.
The unexpected RFCC outage prompted ADNOC to export excess supplies of SRFO.
ADNOC in October said it expected restoration work at the unit to be completed by the end of this year.
In 2017, ADNOC exported about four to five cargoes of 90,000 tonnes of SRFO from Ruwais on a monthly basis but in 2018 it sold the cargoes through long-term supply agreements from January through to December, the trade sources said.
ADNOC did not immediately respond to a request for comment.
The restart of the RFCC will take as much as 450,000 tonnes of feedstocks out of the market each month. The loss of the SRFO from the supply pool will impact global balances but its near-term market impact would be difficult to gauge, said two of the sources.
“(The feedstock market) will tighten for sure,” said one of a sources, a Singapore-based fuel oil trader
“SRFO demand is not looking great because of the strong fuel crack,” said the trader, who declined to be identified as he is not authorised to speak to the media.
The margin between 180-centistoke high-sulphur fuel oil and Dubai crude, known as the crack spread, climbed to record highs in November boosted by falling crude oil prices and signs of tightening global supplies of fuel oil.
The stronger fuel oil cracks are relative to crude oil, the less attractive it becomes for refiners to process fuel oil into higher-value fuels.
Exports of ADNOC’s medium-sulphur fuel oil, typically two or three cargoes of 45,000 tonnes per month, may also decline, one of the sources said, following ADNOC’s commissioning of a specialized coker unit at Ruwais in September. A coker breaks down fuel oil into gasoline and diesel.