A surge in Asian diesel prices after a fire curtailed Royal Dutch Shell PLC’s biggest refinery may be short-lived as Formosa Petrochemical Corp (台塑石化) recovers from its own blaze in July.
Gasoil’s premium to Asian benchmark Dubai crude, the so-called crack spread, gained on Thursday by the most since Sept. 16 after Shell shut processing units and halted shipments from its Pulau Bukom plant in Singapore.
The spread, a measure of refining profit, rose further to US$18.25 a barrel yesterday and is up 13 percent since before the fire, according to PVM Oil Associates Ltd, a London-based broker.
The blaze, which forced a hydrocracker making diesel and gasoline to be shut, was contained on Thursday, Shell said.
While output won’t immediately resume and exports to Southeast Asia may be disrupted, price increases are likely to be muted as other supplies in the region return, according to Purvin & Gertz Inc.
Formosa Petrochemical is starting its 540,000 barrel-a-day Mailiao (麥寮) refining complex in Yunlin County after a July 30 fire, expecting it to be back to full capacity next month.
“The return of Formosa to the market at this time will help relieve any shortage situation,” said Victor Shum, senior principal at Purvin, a consultant in Singapore.
“Even if Shell has a prolonged shutdown, which in my view is not likely, supply tightness won’t be severe because we’ve got a major export refinery coming back on,” he said.
The fire at Pulau Bukom, an island 5.5km from Singapore’s city center, broke out in a pump house two days ago, forcing the evacuation of about 400 workers.
Shell is securing the site of the fire ahead of investigations, and commencing a “progressive shutdown” of refinery units, the company said in an e-mailed statement yesterday.
Shell, Europe’s largest oil company, also shut all loading and offloading operations at the complex’s shipping terminal. There were no fatalities.
The Pulau Bukom refinery has a capacity of 500,000 barrels a day, according to the company’s Web site. It’s Shell’s biggest refining complex globally and among the largest in Asia.
While loading wharfs away from the fire were still in operation on Thursday, Shell has turned away tankers from berths near the blaze.
“We are prepared to shut down all refinery units if this is considered necessary from a safety perspective,” Serene Loo, a Shell spokeswoman in Singapore, said in an update following Thursday’s press briefing.
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