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Two Saudi fuel oil cargoes trade at high prices in tight market

Two Saudi Arabia fuel oil cargoes, both for October loading, were sold at strong price levels for a second time in a week, amid severely tight supplies of on-specification cargoes, traders said on Friday.

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October 8, 2011 10:47 by



Both the East Asian and Middle East markets were tight, as they have been for nearly a month, mainly due to large exports of high-density, high-viscosity cargoes from the Caribbean resulting in severe quality imbalances.

“It will get worse before it gets better. Most of the Middle East-origin cargoes are still staying there, as they have been since the first September-loading barrels were sold, compounding the shortage in East Asia,” a Singapore-based Western trader said.

“And that’s reflected by the increasingly high price levels that East Asian players have to pay for the low-density barrels, like the recent deal for the A961 lot from Saudi Arabia.”

Saudi Aramco sold the 90,000-tonne parcel of 180-centistoke (cst) and 0.96-0.97 density, for Oct. 17-19 loading from Ras Tanura, to Vitol at a premium of $13.00-$14.00 a tonne to Singapore spot quotes on a free-on-board (FOB) basis, up from $10.00-$11.00 previously and the highest price level in more than six years.

Vitol, which also bought the previous offering for Oct. 8-10 lifting, was seen booking the 80,000-tonne Messaied to lift and deliver the cargo to Singapore.

ExxonMobil sold the second high-viscosity 700-cst parcel of about the same size, for Oct. 29-31 loading from its joint venture Samref refinery in Yanbu, to Bakri at a discount of $13.00-$15.00 a tonne to spot quotes, FOB, steady to its previous deal.

Since September, only a single 90,000-tonne parcel has landed in East Asia for each month, with the Vitol parcel expected for November arrival, down from monthly average volumes of 350,000-360,000 tonnes until August.

In total, arrival volumes from the Middle East for October were at year-low levels of 400,000-450,000 tonnes for a second consecutive month, despite an increase in October-loading exports from Iran.

“The increase in Iranian volumes wasn’t that much, just by another cargo, 80,000 tonnes, and wasn’t enough to make up for the shortage here,” another trader said.

“Although more cargoes will be available for November-loading, it probably won’t be that much more due to the peak winter season in Iran, when the Bandar Mahshahr cargoes are kept at home to generate power for heating.”

The tight market has also led to cargoes from India being sold at high levels, including the latest Indian Oil Corp (IOC) parcel, for Oct. 26-28 loading from Chennai, that was sold to Westport at parity to a discount of $1.00 a tonne to spot quotes, FOB, its highest in more than six years.

The last three low-density 380-cst parcels, from Mangalore Refinery & Petrochemicals, all for October- and November-lifting, were also transacted at seven-month high premiums of $5.50-$7.50 a tonne to spot quotes, FOB.

October saw the arrival of 3.9-4.0 million tonnes of mostly high-density, high-viscosity Western arbitrage cargoes, the highest volumes since March, on the back of two months of tight overall arrivals, resulting in the current quality imbalance.

By Yaw Yan Chong

(Editing by Michael Urquhart)



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