18 September 2010
Gasoline in the Middle East extended losses this week as major buyer Iran has almost disappeared from the market and added to oversupply.
"The barrels that were usually going to Iran have no place to go now," one gasoline trader said. "Iran has been struggling to get any cargoes, but now they're not buying."
According to Reuters, Iran has said it has achieved self-sufficiency in gasoline and although traders are skeptical, they do not dispute there has been a fall in imports following international sanctions.
Should it need to buy, Iran has also said oversupply means gasoline is a buyers' market, but traders said Iran would be forced to pay a premium given the difficulties of supplying it.
Prices Lowering
A second trader pegged gasoline at around Middle East benchmark naphtha quotes plus $30-40 compared with plus $60 last week.
"I'd say it could go as low as $20-25 in the coming weeks, but not any lower than that," he added.
Before the sanctions Iran used to import 10-12 cargoes of gasoline every month.
One trader said that even after strategies such as using petrochemical plants to produce gasoline and cutting subsidies to curb demand, Iran would still be short of around 4-5 cargoes.
Oversupply has also weighed on gas oil premiums, leaving traders divided on the outlook.
"I think this will continue until the end of the year," one trader said. "The Middle East is phasing out of summer and there should be less gas oil burning for power, which means the premiums would be much lower."
Regional premiums for 0.2 percent gas oil were pegged at around $0.40-70 a barrel and 0.5 percent at $0.30-50 a barrel.
That compares with last week's $0.80 a barrel for 0.2 percent gasoil and $0.70 a barrel for 0.5 percent.
The retreat of flood-stricken Pakistan from the market has also dragged down premiums, but traders believed this was temporary.
"Premiums have already dropped down quite a lot," a second trader said. "There's still demand from markets like Iraq, Iran, Yemen, Sudan and Saudi Arabia and once Pakistan's back to normal that will have some impact on the premiums," he said.
"Demand should be reasonably balanced within a month or so."
Kuwait Petroleum Corp. (KPC), last week sold more than 300,000 tons of naphtha for October loading to five buyers at a premium of $10-$12 a ton to Middle East quotes on a free-on-board (FOB) basis. The company was offering around 74,000 tons of naphtha initially.
The premiums for the deal were almost unchanged from the previous week's sale when KPC sold a total of around 150,000 spot naphtha for October loading at premiums of around $11-$12 a ton to Middle East quotes on FOB. Although KPC sold more than it initially offered, traders said the overall tone of the market was still bearish.
No Recovery in Sight
"The market is already full of naphtha. I don't see prices recovering any time soon," one trader said.
Saudi Aramco, Asia's top naphtha supplier, is offering a cargo for Oct. 2-4 loading in a tender that closes on Sept. 14. "The market is not looking so good, things are quiet because of the holidays and demand is not so strong right now in the Middle East because at this time of year people are destocking so prices are in the low-single to mid-single digits," the trader said.
"Premiums have come down a lot," one fuel oil trader said. "I see Saudi Aramco's sold at an aggressive level."
ExxonMobil and joint-venture partner Saudi Aramco last sold two similar parcels, for loading during Sept. 22-24 and Sept. 30-Oct. 2, at discounts of $20.00-$25.00 a ton to Singapore spot quotes. That was the lowest level since a June-lifting parcel was traded and down from minus $17.00-$18.00 previously.
Fujairah bunker prices for 180 centistoke (cst) ranged from $3 to $5 a ton above Middle East spot quotes, slightly lower than the $4 to $7 a ton seen last week. "The market is oversupplied at the moment, there is excess supply coming in from Saudi, Kuwait and most of all from Iran," a fuel oil trader said. "I'm hoping that things will start to get a bit better when the winter starts and Iran reduces its sales of fuel oil," he added.
ExxonMobil offered its second high-viscosity fuel oil cargo for October-loading totaling up to 90,000 ton.
The 700-cst lot is for Oct. 10-12 lifting from the Samref refinery in Yanbu, on an FOB basis, with offers expected by Sept. 20 and a deal a day later.
Gasoline in the Middle East extended losses this week as major buyer Iran has almost disappeared from the market and added to oversupply.
"The barrels that were usually going to Iran have no place to go now," one gasoline trader said. "Iran has been struggling to get any cargoes, but now they're not buying."
According to Reuters, Iran has said it has achieved self-sufficiency in gasoline and although traders are skeptical, they do not dispute there has been a fall in imports following international sanctions.
Should it need to buy, Iran has also said oversupply means gasoline is a buyers' market, but traders said Iran would be forced to pay a premium given the difficulties of supplying it.
Prices Lowering
A second trader pegged gasoline at around Middle East benchmark naphtha quotes plus $30-40 compared with plus $60 last week.
"I'd say it could go as low as $20-25 in the coming weeks, but not any lower than that," he added.
Before the sanctions Iran used to import 10-12 cargoes of gasoline every month.
One trader said that even after strategies such as using petrochemical plants to produce gasoline and cutting subsidies to curb demand, Iran would still be short of around 4-5 cargoes.
Oversupply has also weighed on gas oil premiums, leaving traders divided on the outlook.
"I think this will continue until the end of the year," one trader said. "The Middle East is phasing out of summer and there should be less gas oil burning for power, which means the premiums would be much lower."
Regional premiums for 0.2 percent gas oil were pegged at around $0.40-70 a barrel and 0.5 percent at $0.30-50 a barrel.
That compares with last week's $0.80 a barrel for 0.2 percent gasoil and $0.70 a barrel for 0.5 percent.
The retreat of flood-stricken Pakistan from the market has also dragged down premiums, but traders believed this was temporary.
"Premiums have already dropped down quite a lot," a second trader said. "There's still demand from markets like Iraq, Iran, Yemen, Sudan and Saudi Arabia and once Pakistan's back to normal that will have some impact on the premiums," he said.
"Demand should be reasonably balanced within a month or so."
Kuwait Petroleum Corp. (KPC), last week sold more than 300,000 tons of naphtha for October loading to five buyers at a premium of $10-$12 a ton to Middle East quotes on a free-on-board (FOB) basis. The company was offering around 74,000 tons of naphtha initially.
The premiums for the deal were almost unchanged from the previous week's sale when KPC sold a total of around 150,000 spot naphtha for October loading at premiums of around $11-$12 a ton to Middle East quotes on FOB. Although KPC sold more than it initially offered, traders said the overall tone of the market was still bearish.
No Recovery in Sight
"The market is already full of naphtha. I don't see prices recovering any time soon," one trader said.
Saudi Aramco, Asia's top naphtha supplier, is offering a cargo for Oct. 2-4 loading in a tender that closes on Sept. 14. "The market is not looking so good, things are quiet because of the holidays and demand is not so strong right now in the Middle East because at this time of year people are destocking so prices are in the low-single to mid-single digits," the trader said.
"Premiums have come down a lot," one fuel oil trader said. "I see Saudi Aramco's sold at an aggressive level."
ExxonMobil and joint-venture partner Saudi Aramco last sold two similar parcels, for loading during Sept. 22-24 and Sept. 30-Oct. 2, at discounts of $20.00-$25.00 a ton to Singapore spot quotes. That was the lowest level since a June-lifting parcel was traded and down from minus $17.00-$18.00 previously.
Fujairah bunker prices for 180 centistoke (cst) ranged from $3 to $5 a ton above Middle East spot quotes, slightly lower than the $4 to $7 a ton seen last week. "The market is oversupplied at the moment, there is excess supply coming in from Saudi, Kuwait and most of all from Iran," a fuel oil trader said. "I'm hoping that things will start to get a bit better when the winter starts and Iran reduces its sales of fuel oil," he added.
ExxonMobil offered its second high-viscosity fuel oil cargo for October-loading totaling up to 90,000 ton.
The 700-cst lot is for Oct. 10-12 lifting from the Samref refinery in Yanbu, on an FOB basis, with offers expected by Sept. 20 and a deal a day later.
© Iran Daily 2010
