Demand for oil storage tanks in Singapore is surging, a sign that a flood of Russian fuel is being blended and re-exported around the world. According to the tank operator’s executive and a consultant who advises traders on the matter, tank space in the city-state is being held back by increased interest and profits from mixing cheap fuel supplies from Russia with shipments from other sources. The process can help disguise the origin of the cargo, they said.
Singapore has not banned the import of Russian oil
Singapore has not banned the import of Russian oil or oil products, although financial institutions based in the island nation are prohibited from financing or doing business with Russian goods and companies. Singapore government agencies referred to past statements on the ban and price cap policy without further comment.
Still, the handling and trading of Russian fuel remains a sensitive issue in the region, with some buyers reluctant to be seen buying the cargo. Russian oil and fuel flows to Asia and the Middle East have surged since Moscow’s war in Ukraine prompted Western buyers to retaliate. Increasingly, these shipments made their way to blending and redistribution centers such as Singapore and Fujairah in the United Arab Emirates, where they could be combined, repackaged and re-exported globally.
This trend of more shipments from Russia to Asia and the growing role of hubs in their redistribution may further intensify in the coming weeks as Europe prepares to impose new sanctions on Russian oil products on February 5. Oil market participants are watching closely to see where Russian fuels such as gas oil, diesel and heating oil will find a home, as many Asian nations do not take a hard line on sanctions.
“We have seen an increase in inquiries for short-term/spot storage in the period up to December,” said a spokesman for oil storage company Advario Asia Pacific Pte. he said by email. The company verifies the source of products to ensure compliance with Russian sanctions before accepting them, the person added.
A spokesperson for Singapore’s Jurong Port Universal Terminal Pte. declined to comment on specific product movements, but said the company was complying with all applicable sanctions. Advario, Jurong Port, Horizon and Royal Vopak operate commercial tankers in Singapore. The six-month rental of Singapore’s fuel oil, or crude oil, storage has risen by as much as 17-20% over the past year, tank operator firm executives said.
Ship tracking data from Vortexa Ltd. showed that Singapore’s oil receiving terminals took more than double the volume of Russian diesel and fuel oil in December 2022 compared to the previous year. The city-state received 2.6 million barrels of diesel, nearly 40 times more than a year earlier.
The increased volume of Russian diesel coming into Singapore tanks is likely to be re-exported to markets in Northeast Asia, said Armaan Ashraf, global head of natural gas liquids at Singapore-based industrial consultancy FGE. Hubs such as Singapore and Fujairah are likely to continue to play a role in rebranding these barrels for distribution to their respective regions, he added.
Oil profits
Traders and fuel suppliers are getting into oil storage and blending right now because of the “very good” profit margins from such activities, said William Tan, senior vice president of Singapore-based marine fuel consultancy Miyabi Industries.
This is due to the availability of very cheap supplies of Russian fuel oil and other products such as light cycle oil, he said. This greatly encourages the blending of these highly discounted varieties into blends that can be resold at a much higher price, encouraging traders and fuel suppliers to seek offshore tanks or floating offshore storage for such plays.
According to Tan’s estimates, traders can enjoy a profit margin of almost 20% from blending Russian components with other grades to make blended fuel oil. This trend has been in place since October and is more than the typical gain of between 10% and 12%, he added. Still, margins have room to rise if sellers become more desperate to unload their cargo due to further trade constraints.
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