Saudi Aramco sells third fuel lot to East Asia

Saudi Aramco sells third fuel lot to East Asia

Saudi Arabia sold its third August-loading fuel oil cargo to East Asia at lower prices on the back of two unexpected deals that were concluded at high price levels in a tightly-supplied market, traders said on Monday.

August 2, 2011 11:40 by p.deleon

Saudi Aramco sold the high 700-cst viscosity parcel of up to 90,000 tonnes for Aug. 22-24 loading from the joint-venture Samref refinery in Yanbu to US-based trader Cargill at a discount of about $22.00-$23.00 a tonne to Singapore spot quotes on a free-on-board (FOB) basis, down from around minus $20.00 previously, traders said.

“That the consecutive parcel is also heading east at lower price levels would suggest that the Middle East may not be quite as tight as initially expected,” a Singapore-based Western trader said.

“The transaction price is still quite high, and the landed cost in Singapore isn’t that low, unless, of course, they have cheap cutters. Let’s wait and see if more comes here, but we’re done for August and are looking at September arrivals now.”

Two previous deals for Saudi cargoes were done at high price-levels. Glencore bought a similar cargo, for Aug. 15-17 loading, from ExxonMobil at a discount of about $20.00 a tonne to Singapore spot quotes, FOB, up from minus $24.00-$25.00 previously.

Aramco sold another parcel, 95,000 tonnes of A961 180-cst for Aug. 5-7 lifting from Ras Tanura, to France’s Totsa at a premium of $3.00-$4.00 a tonne to spot quotes, FOB, up from $2.00-$3.00 previously.

Prior to the two deals, the last four offerings from Saudi Arabia, including three parcels of low-viscosity, low-density fuel oil offered for the first time due to an outage at Aramco’s Rabigh facility, were sold to players with Middle East options.

Both the East Asian and Middle East markets have been tight due to lower export volumes from Iran following disruptions to its domestic natural gas supplies.

August Iranian arrivals are expected to be less than 200,000 tonnes for the month, down from this year’s monthly average of 550,000-600,000 tonnes and June’s all-time high volumes of about 1.2 million tonnes.

This has also resulted in tighter August-arrival volumes of Middle East fuel oil into East Asia, totalling 500,000-550,000 tonnes so far, its lowest in nine months and down from above 1 million tonnes for each of the last six months.

Adding to the market’s tightness, Western arbitrage inflows for next month are at below-average levels, totaling 2.9-3.0 million tonnes, for a third straight month.

However, the market’s upside is limited by poor demand from

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