Asia has been the top destination for Nigeria's Dangote refinery's low sulphur straight-run (LSSR) fuel oil exports for 2024 so far, data showed, but industry sources expect volumes to fall or remain roughly flat for the rest of the year.
Exports of low-sulphur fuel oil from the newly operational refinery could help ease supply crunch in Asia, where there is a structural shortage of the low-sulphur fuel oil needed to meet bunkering demand in Singapore, the world's largest fuel supply hub.
A total of more than 500,000 tonnes of Nigerian LSSR has arrived in Asia so far this year, with a further 255,000 lots due to arrive in September, according to data from analytics firm Kpler.
The second largest export destination is the United States, with shipments to North America and the Caribbean totalling around 700,000 heaps this year.
Stronger prices have boosted crude prices in recent months, with the first cargoes arriving in Asia in June, but industry sources expect Dangote to cut LSSR production and exports in coming days.
The increase in production will depend on the refinery's crude oil purchases and whether it can efficiently ramp up its secondary refining units, according to people familiar with the matter.
Dangote did not immediately respond to a Reuters request for comment.
Emril Jamil, senior analyst at LSEG Oil Research, said LSSR production would increase through refining lower sulphur crude such as US West Texas Intermediate, but exports would also depend on Nigeria's domestic demand for the fuel.
They have bought a lot of WTI. As they work to ramp up their secondary units, LLSR production will likely increase further, Jamil said.
Once domestic demand concerns are addressed, we may not see any more LSSRs.
The 650,000 barrels per day refinery, Africa's largest, is increasing crude imports amid a domestic feedstock shortage, boosting domestic crude demand in the second half of 2024.
According to market research firm IIR Energy, test runs of gas production are currently underway.
(Source: Reuters)
