Vietnam's Q4 crude exports may turn lower as major customers slash refinery runs

Singapore — Vietnam's crude exports are expected to turn lower in the fourth quarter as major buyers of the country's light, medium and heavy sweet grades in China and Australia cut their refinery run rates amid thin margins and tepid domestic fuel demand.

Vietnam has registered relatively healthy crude exports to date this year as its main customer China took full advantage of low crude prices to aggressively stock up on refinery feedstock during the second and third quarter.

In January-October, Vietnam exported 4.169 million mt, or 100,201 b/d, of crude oil, up 23% from the same period a year earlier, according to latest data from Vietnam Customs.

However, the recent cutback in China's refinery crude runs, on top of a rapid slowdown in feedstock purchases from Australian refineries, could put the brakes on Vietnam's crude sales in the international spot market, refining industry and trading sources said.

Vietnam exported 270,006 mt (63,843 b/d) of crude in October, down 44.6% year on year and 35.3% lower than September, customs data showed.

Vietnam's crude exports could fall to around 1.13 million mt in Q4, down 20% from Q3, according to low sulfur crude and condensate traders based in Singapore and Ho Chi Minh City surveyed by S&P Global Platts.

China's state-run refiners are regular buyers of medium and heavy sweet Vietnamese grades including Su Tu Den, Ruby, Dai Hung and Bach Ho. However, they cut their average run rate to around 78.9% in October, which marked the third consecutive monthly drop from a six-month high of 83.1% in July.

The reduction was due to scheduled maintenance at a few Sinopec and PetroChina refineries, while others were reluctant to boost run rates to make up for the drop amid gloomy domestic and international demand, Platts earlier reported.

The growing possibility of more refinery closures in Australia could also significantly curb Vietnam's crude exports in upcoming trading cycles, as Oceania refiners are important customers of light and medium sweet Vietnamese grades like Chim Sao and Thang Long.

BP Australia said on Oct. 30 that it plans to shut its 146,000 b/d Kwinana refinery in Western Australia and convert it to a fuel import terminal. Australia's 120,000 b/d Geelong refinery is also mulling closure, following a $49.4 million loss in the first half of 2020, Platts reported previously.

Meanwhile, Ampol, formerly Caltex Australia, had announced in October the start of a "comprehensive review" of its Lytton refinery as a prolonged period of poor refining margins and an uncertain outlook threaten the closure of the 109,000 b/d facility.

"Apart from Chinese importers, Australian refineries are key customers for Vietnam. Their (Australian refiners') financial struggles could seriously hurt our international sales," said a trading account manager at state-run PetroVietnam.

In addition, increased domestic requirements could further limit Vietnam's crude exports as the country's 130,000 b/d refinery at Dung Quat -- the only consumer of domestic crude oil -- resumed operation in mid-October following a planned maintenance from early August to late September, refining industry sources with knowledge of the matter said.

Price differentials for Vietnam's flagship export grades Bach Ho and Su Tu Den have come off by more than $1/b since Q3. Bach Ho crude was assessed at an average premium of 33 cents/b to Dated Brent to date in Q4, compared with $1.43/b in Q3, Platts data showed.

Vietnam's crude exports over January-October by outlets (Unit: mt)

*Total includes other sources