04 February 2011

Humeyra Pamuk

Reuters


DUBAI: Physical oil products trade in the Gulf was not affected by the upheaval in Egypt, but traders said that gasoil premiums could come under pressure as the crisis was likely to slash Egyptian demand.

“In the short-term, it could be bearish,” one middle distillates trader said. “If cargoes sent over there cannot be discharged, then traders will have to find a home for those barrels.”

Egypt is a regular gasoil buyer.

“Normally they buy like 6-8 cargoes per month,” a distillates trader said. “So now, that demand could evaporate if the whole country comes to a standstill. But we’ll have to wait and see,” he said.

The most populous Arab country, which is a small non-OPEC oil producer, is also a buyer of jet fuel and some gasoline.

Traders are also keeping a close eye on the strategically important Suez Canal, an important route for crude oil as well products trade, but any disruption there was seen as unlikely.

Shipping sources said Tuesday that cargo operations at Egypt’s Alexandria and Damietta ports had come to a virtual standstill as widespread unrest kept key staff from work and throws the economy into turmoil.

But products and crude oil traders in the Gulf said it was largely business as usual. “There’s a bit of speculative trading going on, and there’s lots of rumors, but no impact so far,” said the second trader.

Most of the traders in Singapore were on holiday due to the Chinese New Year. Activity could pick up next week, when they were expected to come back to the market.

Premiums for low-sulphur gas oil have kept above $3 a barrel. One trader said offers were around $3.25 a barrel.

Kenya made a purchase last week, and Indian refiner Mangalore Refinery & Petrochemical Ltd sold 0.5 gasoil cargoes for March delivery.

At least 340,000 tons of North Asian low-sulphur diesel have been booked for arbitrage shipments to northwest Europe, loading this week, as demand for 10ppm sulphur grades held firm, traders and shipping brokers said.

Traders cited healthy 10ppm sulphur demand from Turkey and Germany after both switched to low-sulphur grades. A similar move by East African countries also supported low sulphur premiums, tightening the market.

Scarce supplies were also the main theme for fuel oil, keeping premiums supported. Indian refiner MRPL has sold 80,000 tons of end-February loading fuel oil at five-year high levels on continued supply tightness in East Asia.

Saudi Aramco has sold 30,000 tons of low-viscosity, low-density fuel oil for February loading, at six-year high, double-digit premiums as supplies of on-specification cargoes increasingly tighten in East Asia, traders said.

Iran, hit by sanctions, managed to get gasoline cargoes from Venezuela’s state oil company PDVSA.

Copyright The Daily Star 2011.