Refineries face closure due to plunging fuel demand

Fuel producer PetroVietnam Oil has seen fuel consumption in August 40 percent lower than its target. The ratio in Ho Chi Minh City and southern localities is up to 80 percent.

Fuel distributor Petrolimex has seen its sales of gas and diesel down by 50-70 percent compared to June.

The figure is set to rise if social distancing orders continue to be imposed, the company has forecast.

Petrolimex has limited receiving fuel from domestic refineries and stopped importing products that can be produced locally to prevent an overload in inventory.

Gas stations are reporting challenges as most people stay at home amid the surging number of Covid-19 cases since April.

A manager of a gas distribution chain in Hanoi said sales have plunged by 80 percent during the period of social distancing in the capital. "Plummeting sales and increasing inventory have urged us to buy at minimum volume."

For these reasons refineries are on the verge of shutting down.

The two major refineries, Dung Quat and Nghi Son, have seen inventory rising to over 85 percent of maximum storage.

A spokesperson for Binh Son Refinery, which operates Dung Quat in the central province of Quang Ngai, said it is now operating at the minimum capacity of 80 percent.

With only 30 percent of products sold, the factory now has over 210,000 cubic meters of various kinds of fuel and over 430,000 cubic meters of crude oil.

There were times when Binh Son Refinery had to send its products to storage, which raised costs.

It might have to hire ships to store more products if there is no more storage vacancy.

But amid the oversupply, fuel imports in July still rose 8 percent from June to reach nearly 584,500 tons.

This amount is worth $387 million, showing a price increase of 38 percent year-on-year.

Deputy Ministry of Industry and Trade Do Thang Hai has demanded importers prioritize domestic products to help reduce the oversupply.