London — Turkey's sole refiner Tupras will continue to maintain its crude purchases amid the fallout from the country's currency crisis, a source close to the company said Tuesday.
But some sources said that there could be a narrower pool of companies willing to sell crude to Tupras because of an increased operational risk caused by the country's current economic environment.
The collapse of the lira poses a serious risk for the country, which imports more than 90% of its liquid fuels particularly crude oil and diesel. It is also a modest exporter of fuel oil and gasoline.
The weaker lira will sharply increase the costs for Turkey's sole crude importer, state-run refiner Tupras.
Sources said that with costs expected to rise due to the current economic situation, Tupras might start exporting more gasoline and fuel oil to take advantage of the stronger dollar.
STRONG CRUDE OIL DEMAND
A source close to the refiner confirmed that there were two current crude oil tenders outstanding on Tuesday, with one for Russia's Urals and Siberian Light or Libya's Es Sider crude having closed in the morning, with results expected later in the day.
Trading sources said that Tupras was looking for heavy sour crudes such as Iraq's Basrah Light and Basrah Heavy and similar grades in a tender closing on Wednesday, August 14 for late September to mid-October arrival. Results are expected from Wednesday afternoon. The source said that there had been no change to the tender document details or the tendering process.
"We have no changes to the tender- it's like a normal regular tender that we'd release," the source close to Tupras said.
But traders said that while the tender process was unfolding as usual, they expected fewer counterparties to be involved in these current tenders.
"It depends on your appetite for risk, depends on counterparties and whether they can extend credit," a crude trader active in the Mediterranean oil market said.
Another said he saw fewer participants as a likely outcome, but that it might only be a short term effect. "I expect some suppliers will have restricted terms in terms of lira/credit issues- could be temporary, but it will depend on how [the situation] develops," the trader said.
Sources said that Tupras was asking for its usual 60 day payment after delivery in its current tenders.
A spokesman at Tupras, which operates four refineries (Izmit, Izmir, Kirikkale, Batman) in the country, was unavailable for comment.
Tupras' spot crude demand has risen sharply this year spurred by strong refining margins and robust bitumen production.
Purchases of Iraqi Basrah Light and Basrah Heavy along with Russian Urals crude have risen steadily this year while imports of Iranian crude have stayed stable at around 175,000 b/d this year, according to S&P Global Platts estimates.
The country's crude imports in May averaged 426,167 b/d. Turkish crude oil demand is also expected to rise later this year with Socar's new 210,000 b/d STAR refinery to be commissioned in the autumn.
FUEL OIL, GASOLINE EXPORTS
There are some expectations that Tupras could now start to export more high sulfur fuel oil in the coming months to take advantage of the strong dollar, as refined products are priced on a US dollar per metric ton basis.
Tupras typically exports about 90,000-120,000 mt/month of RMG grade fuel oil, making it a key source of supply of bunker grade fuel in the Mediterranean.
Turkey also regularly exports gasoline with some recent fixtures seen to Egypt and the Middle East in the past few months. This week, the Torm Helvig was fixed to carry gasoline from Izmit to the US Atlantic Coast with options to go the Persian Gulf for August 21 loading dates, according to trading sources. A source said Tupras normally exports around 222,000 mt of gasoline every month.
DIESEL IMPORTS REBOUND
Besides crude the country is also a big importer of diesel, importing more than 50% of its total consumption which was around 22 million mt in 2016.
The sharp fall of Turkish lira hasn't affected buying diesel yet, sources added.
They noted that diesel demand in Turkey has actually been healthy in recent weeks, propelled by a restocking campaign that followed a period of low stocks.
"It feels like they are buying now what they didn't buy in July," said a trading source.
In late June, Turkey halved the compulsory oil stocks that fuel distributors have to hold, inputting some of those volumes in the spot market at the time. The period also coincided with the run-up to the presidential elections in Turkey.
