SINGAPORE: Taiwan's diesel term buyers are opting to defer the lifting of cargoes to later dates as demand remains muted in Asia while supply has increased on new capacity and refineries returning from maintenance, traders said on Thursday.
Buyers are also lifting cargoes later as they are betting on a recovery in oil prices, which have dropped 11 percent since the start of the year, and are hoping to reap profits from that, they added.
About five unidentified term buyers of Taiwan's Formosa Petrochemical Corp have deferred at least six medium-range (MR) sized vessels containing 500 ppm sulphur diesel from August to September, a source close to the matter said.
"The buyers opted to defer the cargoes as fundamentals are very bad now," the source added. Buyers who are not end-users could also be opting to lift cargoes later as they might be hoping for oil prices to rise, which could mean profits when they re-sell the cargoes later, traders said.
Formosa offers flexibility to term buyers to agree on an alternative loading date in case of any difficulty, according to its term documents.
Sellers normally impose a penalty on buyers should the latter choose to delay lifting of cargoes. It was not clear if Formosa imposed any penalties.
Formosa declined to comment on the matter. With its 540,000 barrels-per-day (bpd) refinery currently running at about 92 percent of its capacity and term lifters deferring cargoes, high inventory levels have forced it to sell the cargoes in the spot market instead at deep discounts, traders said.
An unspecified number of term diesel cargoes of Taiwan's CPC Corp have also been deferred from the third quarter to the fourth due to requests of buyers due to weak regional demand and lack of immediate outlets, said a second source close to the matter.
The refiner exports about 3 MR-sized cargoes of diesel a month. It has agreed for buyers to lift their cargoes at a later date due to low inventory levels as its refinery has been running at over 60 percent of capacity, the source added.
CPC has not offered a spot cargo for September and October due to low inventory, the source said. Cash premium for the Asian benchmark 500 ppm sulphur gasoil has averaged about 10 cents a barrel to Singapore quotes this year, down from last year's average of about 65 cents, Reuters data showed.
A slowdown in diesel demand from key consumers like China and Indonesia coupled with additional refining capacity from the Middle East and China have hit prices, traders said. Refineries have also largely returned from maintenance in the third quarter, causing a surplus of inventory, they said.
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