Thai, Japan refiners hope for steady Pertamina interest in Russian oil, pressured regional crude

Thai and Japanese refiners told S&P Global Commodity Insights they are hopeful Indonesia's Pertamina would regularly embrace Far East Russian crude and take fewer Southeast Asian barrels, putting pressure on various high premium Malaysian and Brunei light sweet grades and helping improve their feedstock procurement economics.

Pertamina regularly feeds its refineries light sweet crude grades sourced from neighboring Malaysia, Brunei and Vietnam. However, the state-run Indonesian oil and gas firm's recent tender openly seeking Russian crude grabbed many Asian traders' attention as the emergence of a new Asian buyer of Russian oil could shift and tweak regional sweet crude trade flow dynamics, as well as Southeast Asian sweet crude spot price differentials, industry and trade sources said over Sept. 16-18.

Earlier this month, Pertamina had issued a tender seeking Russian crude for delivery to Cilacap, Balikpapan or Balongan refinery over November.

The tender closed Sept. 9, with sweet crude traders based in Singapore and refinery feedstock management sources in Northeast Asia indicating Pertamina could have purchased at least one aframax cargo of light sweet Russian Sokol crude for either late October or November delivery. However, the state-run Indonesian oil company declined to disclose any tender result details and the Sokol crude cargo purchase could not immediately be confirmed.

"We have completely stopped purchasing Far East Russian crude ever since international sanctions and the price cap [on Russian oil trades] took effect a couple of years ago... most Sokol and ESPO cargoes have been heading to China and some to India but market chatter recently indicates Indonesia might have completed a spot trade deal for one Sokol cargo for fourth quarter delivery and this could be a small-scale game changer in the regional sweet crude market," said a feedstock and logistics manager at a major South Korean refiner with close knowledge of crude loadings from Far East Russia's Kozmino port and De Kastri terminal.

Although it remains uncertain whether Far East Russian light sweet crudes would regularly fit Pertamina's refinery configuration and linear programming model, Indonesia's desire to explore other low sulfur crude supply options outside its typical Southeast Asian and West African sources could at least put pressure on near-term price differentials in the regional market, according to feedstock management sources at Japanese and Thai refiners.

Southeast Asian crude premiums

Light sweet Malaysian grades are ranked among the world's most expensive crudes and Brunei cargoes also typically command high premiums in the Asian market. Any shift in the regional market's supply-demand and trade flow dynamics that could lower the premiums would bode well for refiners that regularly feed on benchmark Southeast Asian grades like Kimanis, Kikeh, Miri Light, Tapis, Champion and Seria Light.

Platts, part of S&P Global Commodity Insights, assessed Malaysia's flagship Kimanis crude at an average premium of $8.68/b against Dated Brent to date in 2024. The light sweet crude was assessed at an average premium of $8.82/b in 2023.

"If Pertamina can focus more on [Far East] Russian crude, that's good for us... less competition for regional sweet crude cargoes and hopefully lower premiums too," said a feedstock inventory management source at Thailand's state-run PTT with close knowledge of monthly Malaysian, Brunei and Vietnamese spot cargo offers.

Thailand imported 72,594 b/d of mostly light sweet crude from Malaysia over January-July, up 1.7% from the same period a year earlier, latest data from Thai customs showed.

"More than 15% of our feedstocks typically come from Southeast Asia... if Indonesia's strong interest in Russian crude persists, we are hopeful this may lower spot premiums for Brunei, Vietnamese and Malaysian grades," said a feedstock management source at a Japanese refiner who declined to be identified due to the sensitive nature of spot trading information and corporate trading relationships.

Japan took around 310,000 barrels of Brunei's Champion crude in July and Asia's fourth biggest crude importer purchased around 3,000 b/d of light sweet crude from the Southeast Asian supplier in the first seven months, latest data from the Ministry of Economy, Trade and Industry showed.