South African refinery shutdowns boost fuel oil demand

South Africa's Engen is looking as far afield as Singapore and Malaysia for fuel oil as refinery shutdowns curb domestic availability and raise import demand.

Engen has issued a tender seeking to buy 35,000t (226,000 bl) of very low-sulphur fuel oil (VLSFO) for loading from Singapore, Malaysia or the Mideast Gulf over 17-29 May.

Engen typically seeks fuel oil from Europe and the Mideast Gulf but rarely buys from Malaysia and Singapore. It may have been prompted to look to Asia-Pacific because of tight supplies in Europe and more ample availability in the east, said traders, although this could not be confirmed with the company.

European fuel oil stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) trading and storage hub fell to around a two-month low of 1.517mn t (9.78mn bl) in the week to 7 April. Singapore's onshore residual fuel oil stocks rose to a more than four- month high of 23.62mn bl in the same period.

Engen does not produce 0.5pc sulphur LSFO and typically seeks supplies from the import market. But its latest tender comes as South African demand is rising because of prolonged shutdowns at Engen's 105,000 b/d Durban refinery and other domestic plants, market participants said.

About 123,000t (26,000 b/d) of fuel oil is on course to arrive in South Africa next month, the most since April 2018, according to data from oil analytics firm Vortexa.

Engen's Durban refinery has been shut since December because of a fire, with its operating permit revoked until it submits a comprehensive report on the cause of the incident and a set of preventative measures. Astron Energy's 110,000 b/d Cape Town refinery is expected to remain shut until some time next year after a fire in July 2020. And the BP-Shell Sapref joint venture has extended a full shutdown at its 180,000 b/d Durban refinery to mid-June. The Engen and Sapref refineries supply all the local bunker fuel needs at the port of Durban.

Engen's VLSFO tender closes tomorrow and the winner will be notified on 16 April. The company is seeking a cargo with maximum viscosity of 180cst at 50°C, maximum sulphur content of 0.5pc and minimum flash point of 60°C, priced against either Singapore spot 10ppm gasoil or 180cst LSFO assessments.

By Sarah Giam