Thai refiners slash Saudi oil imports in April but extend US crude buying spree

Thailand sharply reduced crude imports from Saudi Arabia but raised shipments of low sulfur crudes from the US and Southeast Asia in April, in an effort to save refinery feedstock logistics costs amid expensive Persian Gulf-East Asia tanker insurance fees, industry and refinery sources said over May 24-27.

Southeast Asia's second biggest economy took 57,205 b/d from Saudi Arabia in April, down 66.1% from a year earlier, while crude imports from the US rose 33.6% on the year to 148,644 b/d last month, latest data from the customs department showed.

Feedstock and logistics management sources at state-run Thai refineries indicated that arbitrage economics for purchasing North American crude have generally been ideal for light sweet US crude imports so far in 2024, while higher Persian Gulf-East Asia freight and expensive shipping insurance costs bode ill for Middle Eastern sour crude cracking margins.

"Brent-Dubai price spread this year generally favors US crude import economics... on top of that, Middle Eastern official selling prices are not cheap to be fair as well," said a crude and condensate inventory manager at a state-run Thai refiner.

The Brent/Dubai Exchange of Futures for Swaps, or EFS spread, a key indicator of Brent's premium to the Middle Eastern benchmark, averaged $1.48/b to date in 2024, down from 2023 average of $1.77/b, S&P Global Commodity Insights data showed. Platts assessed the Brent-Dubai EFS spread at 29 cents/b on May 24, marking the lowest level since 24 cents/b on Dec. 12, 2023.

A weaker EFS makes various sweet crude grades produced in the Americas, North Sea and Africa that are linked to the European benchmark more economical compared with Dubai-linked Middle Eastern grades.

"General freight rates have not exactly gone up a lot but it's the expensive insurance fees amid prolonged geopolitical tensions in the Middle East that could negatively impact overall refining margins... it might be prudent to reduce term supply commitments [from key Middle Eastern producers] but adopt flexibility in spot purchases," said a feedstock and logistics manager at another Thai refiner.

Platts, part of Commodity Insights, assessed the Persian Gulf-East Asia VLCC route on a 270,000-mt cargo basis at an average w65.64 to date in 2024, compared to 2023 average of w57.4.

Thailand also boosted crude imports from neighboring Southeast Asian producers in April, signaling refiners' efforts to save on logistical costs by taking advantage of short-haul supply sources.

Shipments of various light, medium and heavy sweet Vietnamese crude grades including Rang Dong, Bach Ho and Su Tu Den in April jumped 60.2% on the year to 27,475 b/d, while Malaysian crude imports in the same month rose 30.2% from a year earlier to 82,521 b/d.

Upstream

Meanwhile, Thailand produced 77,633 b/d of crude oil in the first three months of 2024, up 4.1% year on year, with major output coming from Sirikit (25,437 b/d, up 1.3% year on year), Tantawan (15,463 b/d, rising 31.1% year on year) and Nongyao (8,119 b/d, down 7% year on year).

The country's ultra-light crude, or condensate, output over January-March rose 4.1% on the year to 69,412 b/d, with the main production coming from Bongkot (24,102 b/d, surging 53.1% on the year) and Erawan (15,283 b/d, up 64% on the year), according to data released May 12 by the Energy Policy and Planning Office.

Output data for the first four months of 2024 is scheduled to be released in June.

Thailand currently has total refining capacity of nearly 1.244 million b/d in 2024, unchanged from 2023, the data showed.

Thailand's major crude suppliers (Unit: b/d)

Source: Thai customs