Analysis: India’s voracious appetite offers a bright spot for Malaysian crudes


Malaysian crude exports fell by close to a quarter in May following a shift in Asian importers’ preference from light sweet crudes to relatively cheaper cargoes from West Africa and the Mediterranean amid reluctance by Malaysia to cut their offers.

But with price differentials for light sweet Malaysian crudes showing a recovery from the lows seen in the late second quarter, traders said they expect a slowdown in arbitrage cargo flows from outside the region in the following months.

In addition, buoyant Indian demand is seen as one of the brightest spots for Malaysian crude sales.

Malaysia’s crude exports fell by more than 23% year on year in May to 1.02 million mt, or 240,584 b/d, from 1.33 million mt in May 2015.

It was also 11.5% lower from 1.15 million mt in April, data from the Department of Statistics showed earlier this month.

Market participants said limited offers from state-owned Petronas in an environment of low prices contributed to the sharp fall in exports in May.

“It was probably the company’s strategy to protect values amid the current low crude price environment,” said a Singapore-based sweet crude trader. “When crude prices were over $100/b, suppliers weren’t really bothered by a $1-$2/b drop in crude premiums, but obviously it’s different now where every cent matters.”

Petronas, a key supplier of Malaysian light and medium sweet crudes, was less active in the spot market during Q1 and Q2, regional traders said.

The company had only offered a limited number of Labuan, Miri, Tapis and Kikeh crude cargoes during the April-June trading cycle.

Sources said Petronas was keen to control the overall supply in the spot market in a way to help support prices as differentials of many of the country’s benchmark grades, like Labuan, Kikeh and Miri, faced significant downward pressure amid increasing preference among regional end-users for cheaper light sweet crudes from West Africa and the Mediterranean.

In March, Petronas did not offer any cargoes of Kimanis and Labuan crude for loading in May as the company had other commitments, a market source with close knowledge of the company’s monthly crude sales told S&P Global Platts.


Malaysia’s crude oil exports to India surged more than 19% year on year in May to 283,572 mt and 17% year on year in April, make it the top destination for the Southeast Asian exporter.

Traders said that India’s appetite for Malaysian crudes was expected to remain strong in the coming months.

Rising interest in Malaysian crudes was evident this week when India’s state-owned Bharat Petroleum Corp. Ltd. issued a spot tender Monday seeking up to 1 million barrels of various Southeast Asian light sweet crudes, including Malaysia’s Miri Light, Labuan, Tapis, Kikeh, Kimanis and Bintulu as well as Brunei’s Seria Light and Champion for loading over September 11-20.

The latest spot tender raised a few eyebrows in the Asia-Pacific sweet crude market as BPCL does not usually seek Malaysian and Brunei crude grades in the spot market.

End-users across Asia, especially Indian refiners, have been fretting about a potential disruption in the supply of light sweet Mediterranean grades, questioning the near to medium-term stability in Azeri Light exports on the back of fresh geopolitical jitters following the failed coup attempt in Turkey last week.

S&P Global Platts assessed Malaysia’s benchmark Kikeh crude at a premium of $2.90/b to Platts Dated Brent crude assessments on July 13, the grade’s highest differential since May 3 when it was assessed at a premium of $3.15/b.

The light sweet crude was last assessed at Dated Brent plus $2.80/b Wednesday.

Many regional sweet crude traders pointed out that a number of Indian state-owned refiners had been actively picking up Malaysian cargoes for loading in July and August.


Thailand was the second-largest buyer of Malaysian crude in May at 240,006 mt, down 39% from a year ago. Australia came in third with 151,411 mt, down 38% year on year.

Over January-May, Malaysia’s cumulative exports were 6.33 million mt, down 3% from a year earlier, largely to Australia, India and Thailand, according to the data.

In the same period, it exported 261,725 mt of condensates, up 41.6% from 184,846 mt a year earlier.

As Malaysia reined in export offers, more crude was available for the domestic market, reducing the need for imports.

Therefore, the country’s crude oil imports in May declined 25.75% year on year to 643,354 mt, latest data showed.

Saudi Arabia, Venezuela and Gabon were the top suppliers of crude oil to Malaysia in May.

In the first five months of the year, Malaysia imported 3.62 million mt of crude oil, down 16.1% year on year. Volumes came mainly from Saudi Arabia, Venezuela and the UAE.

The Malaysian government does not release comprehensive oil production data, nor on refinery runs and domestic crude output.

Malaysia has five refineries with a combined crude processing capacity of 563,000 b/d. Petronas also has a 74,300 b/d condensate splitter at its Kertih refinery, while Kemaman Bitumen Co. owns a 25,000 b/d bitumen refinery that uses heavy crude as feedstock.

Source: Platss

Previous Next

We Have Increased & Enhanced Our Global Presence: Mr. Suresh Sinha, MD, IRClass

View More Videos


India Tanker Shipping Trade Summit 2018

View All Albums