Middle East gasoil premiums soar, Aramco buys continue

Middle East gasoil premiums soar, Aramco buys continue

Market tight, Kuwait refinery issue restricts supply; Bapco cargo sold above $5/bbl, highest in years

September 6, 2012 5:44 by Reuters

Gasoil premiums in the Gulf Middle East hit new highs this week, driven by a tight market where the spot is being supported by still strong summer demand, traders said.

Saudi Aramco has been the main buyer in the Gulf region during the summer, snapping up more than 1.6 million tonnes of gasoil between June and September while demand from South Africa and Sudan has also supported prices, traders said.

An outage at Kuwait’s Mina Abdullah refinery, where a gasoil producing hydrocracker is thought to have been down for at least two weeks, has been further squeezing supplies.

“The market is just so tight right now, so any cargoes being offered are instantly snapped up,” a Gulf-based trader said. “Gasoil premiums have been going up steadily and I think they will likely stay high until end of the year at least.”

The tight market was reflected in the most recent tender by Bahrain Petroleum Co (Bapco), which has sold a gasoil cargo for Oct 28-31 lifting at a premium of $5 to $5.35 a barrel above Middle East quotes, consistent with November and August-loading cargoes sold earlier, traders said.

Recent sales to Aramco had a premium of around $4.70 a barrel, compared with $4.20 to $4.50 a barrel in July and August, two traders said.

“You have to go back to 2008 to find numbers above $5 a barrel,” a middle distillates trader said.

But several other traders expect premiums to start easing over the next few months as Saudi summer demand tails off and no increase in spot volumes expected from Yemen.

But for now Aramco purchases still support the market.

The state oil giant, which bought approximately half a million tonnes of gasoil in August, booked at least seven cargoes this month.

“For October it will probably be something similar in gasoil, maybe a couple of cargoes less,” another Gulf-based trader said.

Demand spikes in the Middle East, particularly in the summer when soaring temperatures boost power demand and the peak driving season during the Muslims’ holy month of Ramadan stokes gasoline use.

The kingdom’s gasoline purchases, which were around six to seven cargoes in September, are set to increase slightly in October due to the Islamic pilgrimage Haj season.

Elsewhere, South Africa’s Engen has bought a total of 70,000 tonnes of medium-sulphur diesel within the last two weeks, while Sudan is seeking about 70,000 tonnes of gasoil for delivery in October.

Asian markets were also tight due to strong spot demand and some refinery shutdowns like Sri Lanka. Lack of availability in east Asia further restricts supplies in the Gulf, traders said.

(Editing by Daniel Fineren)