Oman slips on Formosa shutdown

SINGAPORE: The Middle East crude market slid on Monday after Formosa Petrochemical Corp, one of the largest refiners in Asia, shut its entire refinery for safety checks.

FORMOSA

- Formosa had to shut its 540,000 barrels-per-day (bpd) refinery as the Taiwanese government ordered safety checks after a weekend fire damaged power cables at the company's Mailiao production site.

Formosa has asked to defer term crude cargoes for August-loading from Saudi Arabia and Kuwait, a trade source said, adding that the company had not received confirmation.

The refiner is looking for oil tankers to temporarily store crude that it had bought, traders said. It may have to sell spot cargoes of Middle Eastern crude such as Oman and Basra Light as well as Angolan sweet crude if it has nowhere to store them, they said.

"It all depends on how extensive the downtime is," a trader said.

The news was bearish for Middle Eastern crude and sent Oman values diving to as low as 80 cents a barrel discount to Dubai swaps quotes before recovering to around 36 cents a barrel discount, traders said.

The bounce was an overreaction from the market, a trader said. "It should be weak, but not this weak," he added.

SUPPLIES

- Qatar, one of OPEC's smallest producers, has notified at least one Asian buyer that it will supply Marine and Land crude at full contracted volumes for September, unchanged from August levels, a trade source said.

The move was expected as it has been supplying both grades at full contracted volumes since August 2009.

OMAN ASSESSMENTS

- September Oman traded on the DME slipped 33 cents to a discount of 11 cents to Dubai swap quotes at 0830 GMT, using the settlement price for DME futures, the ICE one-minute marker for Singapore and the Brent-Dubai EFS as calculated by Reuters.

EFS

- Front-month Brent/Dubai Exchange of Futures for Swaps (EFS) for September rose 32 cents from Friday to $5.99 a barrel.

MARKET NEWS

- Malaysia's government has ordered seven floating storage facilities with a capacity to hold about 1.9 million tonnes of crude or fuel oil anchored off the south-eastern port of Pasir Gudang to leave by the end of this month, industry sources said.

- Glencore, the world's largest diversified commodities trader, has booked a super-tanker to store part of the nearly four million barrels of gas oil it purchased in July, industry sources said.

- US offshore oil and natural gas producers are restarting production operations with Tropical Storm Don long over, data from Gulf of Mexico energy regulators showed.

REFINERY MARGINS

- Complex processing margins for Dubai in Singapore were around $6.05 per barrel, down from an average of the last five days of $7.86, Reuters data show. Over the last year, the average margin has been around $6.64 per barrel.

CRACK SPREADS

- Fuel oil's September crack widened 2 cents to a discount of $7.79 a barrel to Dubai crude.

- Gas oil's September crack rose $1.77 to a premium of $20.08 a barrel to Dubai crude.

- The naphtha CFR Japan front-month crack widened 33 cents to a discount of $6.42 a barrel to Brent.

OUTRIGHT PRICES

- September ICE Brent was at $119.10 a barrel at 0830 GMT, up $1.01 from Friday.

- October Oman rose $1.30 to settle at $113.00.

Copyright Reuters, 2011