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Looming refinery outages push gasoline, gas oil

Low sulphur gas oil keeps rising, Kuwait tenders to sell.

January 12, 2011 12:40 by

Supply tightness and looming refinery outages in the Middle East have kept gasoline and gas oil premiums supported this week, traders said on Wednesday.

Saudi Aramco, state-run Bahrain Petroleum Co (Bapco) and Abu Dhabi National Oil Company (Adnoc) will have partial shutdowns of some of their refineries between mid-January to mid-February.

“The upcoming refinery shutdowns are not yet fully priced,” one gasoline trader said. “In a couple of weeks time, or in ten days, we could see the market getting tighter.”

Aramco has scheduled to shut a 150,000 barrels-per-day (bpd) crude distillation unit (CDU) in Jubail for about 45 days of maintenance starting from February, sources had said.

“There is not huge demand from the Middle East but we will see Saudis coming to the market for more spot cargoes in the next six months, particularly during their refinery outages,” a second gasoline trader said. Aramco has sealed a deal to purchase up to 360,000 tonnes of gasoline over six months from BP and Lukoil at below-market prices, industry sources said on Tuesday.

In the absence of once major gasoline buyer Iran, Saudi Arabia is another big buyer of the motor fuel. The kingdom typically imports between 60,000 bpd and 70,000 bpd.

United Arab Emirates’ fuel retailer Emarat has also concluded its term purchases, the second trader said. The company made a deal with Total to buy around two cargoes every month between January to June, he said.

Two traders said prices for 95 RON gasoline were a couple of dollars higher than last week’s plus $20 over benchmark Mediterranean quotes.


Saudi Aramco has also concluded its 2011 term purchases for low sulphur gas oil. Traders said the kingdom has bought up to 48 cargoes for the period of February to November. Vitol, Cargill, Fal Oil, Total, IPG were among the sellers.

One trader said for anything less than six cargoes the premium was $4.45 a barrel over Middle East benchmark while for six and more than six cargoes the premium was $4.75 a barrel.

“The market is tight on 500 ppm,” one distillates trader said.

Some producers have moved to capture the premium. Kuwait Petroleum Company (KPC) was looking to sell 40,000 tonnes of low sulphur gas oil, also known as 500 ppm, traders said.

East African countries such as Mozambique, Kenya and Tanzania were the main buyers of low sulphur gas oil. But traders said 500 ppm was becoming more popular across the Middle East as well.

“You can deliver it to anywhere nowadays,” another middle distillates trader said. He quoted premiums for 500 ppm close to $3, slightly higher than last week’s $2.75.

0.2 percent gas oil was last traded at 60 cents, unchanged from last week, while 0.5 percent gas oil was slightly higher at $20-30 from trading flat last week.


Naphtha remains tight as well and spot purchases support premiums. “It could get even tighter with less cargoes from Saudi,” one naphtha trader said.

The state oil giant is cutting naphtha supplies to Asia due to planned maintenance.

Last week, India’s Reliance sold 55,000 tonnes of naphtha to Trafigura at premiums above $20.00 a tonne to Middle East quotes, higher than January’s average, reflecting the tight market. [ID:nL3E7C60IV]

Fewer cargoes by Saudi Aramco helps fuel oil market remain tight, traders said, as the bulk of the production is going to domestic demand because of higher heating needs.

Oil major ExxonMobil has sold up to 90,000 tonnes of January-loading high-viscosity fuel oil at higher price levels amid a tightening of supplies in the Middle East, traders said on Wednesday.

January-loading exports from Saudi Arabia, including the current lot, stand at 350,000-400,000 tonnes compared with December’s 400,000-450,000 tonnes. Not much more is expected for January. [ID:nL3E7CC0B2]

One fuel oil trader pegged Fujairah bunker prices were above $7 per tonne, compared with last week’s $6 to $7 per tonne. (Additional reporting by Reem Shamseddine in Khobar, Saudi Arabia, Editing by Sue Thomas)

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