SINGAPORE: Russia's three-year position as China's top fuel oil supplier looks shaky as it keeps more of the product to process domestically, while Venezuela and Singapore ramp up exports to the Chinese market to fill the gap.
Increased competition from Japan and South Korea for Russian straight-run fuel oil (SRFO) has also boosted spot premiums to what some traders say are the highest ever, encouraging China's independent "teapot" refineries to trim run rates or use cheaper, lower quality fuel oil from Venezuela and Singapore.
Venezuela and Singapore were the top fuel oil suppliers to China in the first quarter, with their respective volumes of 1.42 million and 1.40 million tonnes up more than a third each from a year ago.
Russian exports to China fell nearly 40 percent for the same period to 1.17 million tonnes.
Russia's shipments to China started falling in the middle of last year, as it dropped first behind Singapore in the third quarter, and then Venezuela and Singapore in the fourth - although it maintained the No.1 spot for all of 2013. Russia has been China's top fuel oil supplier since 2011.
"Russian exports have been limited, while Venezuelan oil has been steadily coming into China," said a source at a major Chinese refiner.
"Venezuelan oil used as a teapot feedstock has also dropped in line with overall demand, but the bunker segment is holding up," he said.
The source estimated that more than 60 percent of Venezuelan fuel oil shipped to China is sold as marine fuel, a segment in which Russian fuel oil does not compete.
Overall in the first quarter, China's fuel oil imports fell 20 percent to 5.57 million tonnes, as its requirement for straight-run grades declined with lower processing rates and more crude import quotas granted to major teapot refiners.
A Singapore-based trader said it was not surprising that Singapore had moved up the ranks alongside Venezuela. "Singapore is the main bunker supplier," he said.
The city state is the world's largest bunkering or ship-fuelling hub, selling 42.7 million tonnes of marine fuel last year.
Cargoes from the Americas and Europe, the main sources for fuel oil in Asia, break bulk in Singapore to be sold locally as bunkers or onwards in smaller shipments to other countries, including China.
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