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Chinese refiners to complete maintenance May-June

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Exxon to use more sour crude after Singapore refinery

upgrade

By Florence Tan and Trixie Yap

SINGAPORE, March 20 (Reuters) - Asia's sour crude demand

is set to rebound from late in the second quarter as refiners

return from maintenance and Exxon Mobil ( XOM ) completes a

Singapore refinery upgrade that is poised to increase its heavy

oil use, traders and analysts said.

The rise in demand from some of the world's top oil

importers led by China will support Middle East benchmarks Dubai

and Oman despite the prospect of more supply from OPEC+ after

the group agreed to increase production from April.

"After weaker-than-expected imports from China for the

beginning of the year, we expect Chinese crude demand to resume

as refinery throughputs rise, along with those of other Asian

refiners," said Harry Tchilligurian, head of research at Onyx

Capital Group.

"This will continue to support Dubai."

Several major Chinese refineries, mostly operated by Asia's

largest refiner Sinopec, have shut for maintenance

since end-February, curbing crude demand.

About 1.8 million barrels per day (bpd) of crude processing

capacity will be offline in April, with the volume dropping to

about 1.2 million bpd in May, according to Reuters calculations.

Adding to demand, Exxon Mobil ( XOM ) said in a statement on

Wednesday it is on track to complete an upgrade at its Singapore

refinery and petrochemical complex this year after the pandemic

delayed the project.

The multi-billion-dollar Singapore residue upgrade project

at its Jurong complex will raise production of low-sulphur

diesel by 48,000 bpd and its capacity of base oils, a raw

material for lubricants, by 20,000 bpd.

The project is expected to start operations in the third

quarter, three sources familiar with the matter said.

While the plant's crude processing capacity remains

unchanged at 592,000 bpd, traders expect the refinery to use

more heavy, high-sulphur crude from the Middle East, reducing

its intake of U.S. light sweet crude.

More than half of the refinery's crude imports are currently

light sweet oil from the U.S., Kpler data showed.

DUBAI VS BRENT

Middle East benchmark Dubai became more expensive than Brent

crude on Wednesday, creating arbitrage opportunities for

Atlantic Basin oil to head to Asia.

"The strength in the medium sour crude is thus probably the

center of the strength in the global crude oil market at the

moment," SEB's chief commodities analyst Bjarne Schieldrop said

in a research note, adding that the first and third month price

spread for Dubai is markedly stronger than comparable spreads

for Brent and West Texas Intermediate.

However, Tchilligurian said further weakening of the

Brent-Dubai spread may be limited going forward as Brent will

draw some support from the exit of scheduled maintenance by

European refiners.