Singapore—Malaysia is poised to accumulate surplus transportation fuels as the country's major refineries resumed operations after maintenance at a time of limited domestic consumption, market participants said.
Malaysia's gasoline output in October increased 15.96% on the month at 455,887 mt, according to preliminary data from the Department of Statistics released in the week of Dec. 13.Maintenance work at Petron's 88,000 b/d Port Dickson refinery was reported to have come to a close, while operating rates across Malaysia's other refineries were similarly raised early in the fourth quarter, according to industry sources with direct knowledge of the matter.
Gasoil production in October also rose 0.7% from September at 899,525 mt, while jet fuel/kerosene output jumped 16.6% on month at 336,330 mt, the data showed.
Late October, Malaysia re-imposed movement restrictions in the country's capital of Kuala Lumpur, as well as the city of Putrajaya and the state of Selangor due to new spikes in COVID-19 cases.
As a result, latest mobility data from Apple showed driving activity in Kuala Lumpur tumbled 32% below baseline levels Dec. 16.
Meanwhile, Kuala Lumpur International Airport posted a 73% year-on-year decline in passenger traffic over January-September. Passenger traffic across Malaysia's other airports fell 65% year on year during the same period.
Due to the severe disruption in domestic fuel supply-demand balance, Malaysian fuel importers have been seeking to either cancel or defer cargo deliveries in recent weeks.
"With their [Malaysia's] output up, and the new lockdowns that were imposed in October, a number of traders faced logistical problems," a middle distillate trading source in Singapore said.
Excess supply for exportsReflecting the tepid domestic transportation fuel consumption, Malaysian refiners plan to cut back on run rates and fuel output in the near term, according to a plant operations source at Petronas' Melaka refinery.
Malaysian refineries were estimated to have cut combined gasoline and gasoil production in November to 950,000 mt from 1.36 million mt in October, and December output is forecast to fall further, according to light and middle distillate marketing managers and traders in Malaysia and Singapore surveyed by S&P Global Platts.
Still, it remains to be seen if the refiners' efforts to control the production volume would ultimately slow down the country's uptrend in fuel sales in the Asian market.
"If domestic consumption continues to lag, the surplus barrels would continue to flood the regional market looking for an outlet," said a middle distillate trading and marketing manager in Kuala Lumpur.
Malaysia exported 28.91 million mt of oil products in the first 10 months, an increase of 26.2% from the same period a year earlier, latest data from the statistics department showed.
Reflecting the oversupply and weak demand conditions, the Asian gasoline market structure fell deeper into contango in Q4.
The front and second month FOB Singapore 92 RON gasoline swap timespread averaged at minus 38 cents/b to date in Q4, compared with the Q3 average of minus 4 cents/b, Platts data showed.
