Argus Media Limited

10/20/2021 | News release | Distributed by Public on 10/19/2021 21:18

Tight VB feedstock supplies cut Iranian bitumen output

Vacuum bottom (VB) feedstock supplies have tightened in Iran because of reduced availability from domestic refineries, consequently resulting in lower bitumen production.

Bitumen supplies have also tightened with producers holding limited stocks because of reduced production, which fell by an estimated 22pc on the year during March-August, and supply chain bottlenecks in the country.

The 320,000 b/d Bandar Abbas refinery has reduced VB feedstock supplies to bitumen producers since the last week of September when it announced a 50pc cut to production that is expected to last for two months. Planned maintenance at the Bandar Abbas refinery from 23 October, which is expected to last through 21 November, has also led to a sharp reduction in VB feedstock supplies. The refinery usually supplies 40,000 t/week of VB feedstock but this was more than halved to 15,000-20,000 t/week in the past month.

There was strong competition among buyers this week when VB traded on the Iran Mercantile Exchange. VB prices from the Bandar Abbas refinery rose by nearly 20pc to 96,498 rial/kg (around $370/t) yesterday compared with offers at 80,831 rial/kg (about $310/t) earlier this week.

Meanwhile, the 250,000 b/d Tehran refinery has also scheduled a month of maintenance from mid-October, which is expected to slash its VB feedstock supplies by 25pc to 15,000t starting from this week. VB supplies are not expected to be completely lost from this refinery but its VB prices are likely to rise by around 25pc from initial offers of 94,031-96,599 rial/kg ($360-370/t) this week.

Refineries are trying to produce and store more fuel oil for winter and Iran's state-owned NIOC also did not offer fresh high-sulphur fuel oil (HSFO) cargoes for export, said local market participants, adding that other smaller refineries prefer to use VB feedstock for production and export HSFO because of higher margins.

VB deliveries from refineries have also been obstructed by high congestion of trucks moving from plants to ports, contributing to the reduction in supplies of the feedstock.