Slow demand hits Gulf long-term deals
Dubai, November 26, 2009
Gulf refiners are striking deals or have started negotiations on long term supply for 2010 with premiums so far at lower levels than for 2009 due to thin demand.
On the spot market, fuel oil prices fell amid plentiful supply from Saudi Arabia.
Aramco and Exxon Mobil sold a cargo each of high viscosity fuel oil from their joint Samref refinery in Yanbu, pushing down prices.
Aramco sold Cargill its cargo of 85,000 tonnes of 650-centistoke fuel oil for December 3-5 loading at $23-$24 below benchmark prices.
Exxon sold a cargo of similar size and quality for December 9 loading, which trade sources said it may have sold at a discount of around $30.
The fall in prices comes amid bearish fundamentals in Asia as rising Middle East supplies outpaced bunker demand. Weekly fuel oil stocks in Singapore reached a record high.
Aramco offered up to 90,000 tonnes of 380-cst fuel oil for December 4 loading from Jubail, its first December-lifting cargo.
Qatar concluded long-term deals at discounts to benchmark prices around double the discounts offered in the last round of talks.
Qatar sold 1.54 million barrels of 90-octane gasoline to Total for January-June 2010 loading. The price was over $1 a barrel below the Singapore 92-octane grade quotes on a free-on-board (FOB) basis.
It sold another 1.5 million barrels of 97-octane gasoline to Glencore at a discount of about 80 cents to $1 to Singapore 97 octane quotes.
For July-December 2009, the discounts were around 50 cents per barrel.
Bahrain is discussing gasoline contracts for 2010 with clients.
Naphtha was the only product seen bullish due to tight spot markets in Asia, traders said. Asian naphtha refining margins have risen to a 14-month high on strong import demand from China for petrochemicals, even as supply is tight due to refinery run cuts amid poor prices for other products.
Qatar sold 600,000 tonnes of full-range naphtha for 2010 lifting to Sempra at premiums of around $15 a tonne to Middle East spot quotes.
Bahrain earlier this month struck a term deal for B220 naphtha for the first half of 2010 with Glencore at a premium of $3-$4 a tonne, down from the premium of $6 last year.
Kuwait has also recently concluded term deals for jet fuel and gas oil for 2010 at premiums well below last year. Earlier this month, it sold jet fuel at a premium of $1.85 a barrel to Middle East spot quotes, down from around $3.50 a year earlier.
'The market is flooded,' said one trader. 'Arbitrage flows are not really working. There is plenty of oil in Europe and the US. It really has been a bad year. It's no surprise that the long-term premiums are lower.'
KPC concluded term deals on 0.2 gas oil for 2010 at a premium of $1.45, down from a premium last year of $2.75. Term deals on 500 ppm were done at $1.75 premium.
Bahrain and Saudi Arabia were both discussing jet and gas oil contracts for 2010, traders said.
Aramco may hold back some volumes for spot sales rather than maximise long-term deals due to poor premiums.
'It might be better to wait and hope the spot market improves over the very poor premiums currently on offer,' said one trader. 'But they have to tie some of it up in term deals.'
Aramco was likely to show its next stem of gas oil for December 8-10 loading, he added. – Reuters