Several refineries in the Middle East and Asia have shut down in the past week due to fires and other technical problems, leading to a jump in profit margins for facilities still operating.
The higher Asian refining margins have beat back concerns that profits would fall as crude oil prices gained as the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers began to implement their agreed production cuts from January to reduce global oversupply.
Besides the fires and other shutdowns, maintenance and repairs at refineries in Indonesia by Pertamina and in Singapore by Royal Dutch Shell have further boosted oil product margins.
"Margins will be supported as these outages will affect the ability of the region to stock up before maintenance picks up in March," said Nevyn Nah, a fuel analyst at Energy Aspects in Singapore.
Profits for processing a barrel of Dubai crude at a Singapore refinery jumped to USD7.64 a barrel on Jan. 16, the highest since Nov. 30, Reuters data showed.
Operators that had to shut fire-hit or other units include the Abu Dhabi National Oil Company and Russia's Rosneft, as well as India's Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd.
ADNOC said on Monday it will restart its Ruwais west refinery within 48 hours, with the impact from the fire limited to propylene production.
Rosneft has restarted its fire-hit plant at its Tuapse oil refinery, and Shell said there was no impact on operations at its Pulau Bukom site in Singapore as a chemical leak happened at a unit undergoing planned maintenance.
HPCL is restarting a fire-hit crude unit in two to three days, and BPCL said production at its Kochi refinery has not been affected by a minor fire on Jan. 10.
Still, the shutdowns have resulted in delays of several fuel deliveries, including diesel, according to trading sources with knowledge of the matter.
"Lower supplies due to these disruptions have already pushed the Asian naphtha and fuel oil cracks up in the last week or two," said Suresh Sivanandam, senior research refinery and chemical analyst in Singapore at consultancy Wood Mackenzie.
Despite the outages, traders said there was no real supply shortfall so far, thanks to high fuel stockpiles.
Aggregate oil product stocks in key areas like the United States, Europe, Singapore and Japan rose by more than 21 million barrels last week, the biggest weekly increase since January 2007, according to energy consultancy FGE.
Thus, although some of the refineries have started to return to operation, the unexpected closures have mainly increased the availability of crude for Asia buyers despite the OPEC cuts.
ADNOC, for instance, has offered into the spot market supplies of its flagship Murban crude usually processed at its Ruwais plant, despite cutting its output as part of the OPEC-led effort to reduce supplies and prop up prices.
Brent crude futures, international benchmark for oil prices, have shed more than 4 percent in value since an early January peak, as doubts over compliance with the announced cuts prevail, and as crude demand takes a short-term hit.
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