SINGAPORE: Indian refiner Mangalore Refineries & Petrochemicals Ltd (MRPL) sold 80,000 tonnes of low-density, low-water fuel oil, for October loading, at seven-month high premiums of more than $7.00 a tonne, traders said on Friday.
The deal followed a sale by Indian Oil Corp (IOC) of a 35,000-tonne lot, also for October lifting, at the highest level in more than two years.
Traders said the high price levels show the severe quality imbalance for October, expected to be the most heavily-supplied month since March, with 3.4 million to 3.5 million tonnes of Western arbitrage arrivals.
"It's really serious now. That players are willing to pay these kinds of premiums for the cargoes just goes to show how severe the quality imbalance is," a Singapore-based Asian trader said.
"A lot of the arrivals, especially those from the Caribbean, are high-water and high-density, and need to be blended before they can be sold, mainly into the bunkers market. And there's not enough blend-stocks to go around."
The MRPL parcel, a 380-cst lot, for loading Oct. 19-21 from New Mangalore, was sold to Japan's Mitsui at a premium of $7.00-$8.00 a tonne to Singapore spot quotes on a free-on-board(FOB) basis, up from a $2.50-premium previously and the highest price-level since the sale of two March-loading parcels.
MRPL has offered another similar cargo, for Nov. 3-5 lifting, via a fresh tender, issued soon after the sale, which closes on Sept. 27 and will remain valid for a day.
A day ago, the IOC parcel, for Oct. 12-14 lifting from Chennai, was sold to BP at a discount of $4.00-$5.00 a tonne to spot quotes, FOB, up from minus $8.00-$9.00 previously and the highest since the sale of a similar lot loaded in August, 2009, Reuters data showed.
Traders said the problem arose due to unusually heavy volumes of high-density, high-water cargoes among the large Western arbitrage arrivals for next month, and exhausting the limited amount of blend-stocks available.
Most of these cargoes are of 0.7-0.8 percent water and of density above 1, above the marine fuels market's tolerance of 0.5 percent for water and 0.99 for density.
The lack of on-specification cargoes has also kept the market strong, despite the heavy October arrivals, with its prompt October/November time-spread rising to $5.00 a tonne in backwardation midday Friday, rising for most of the month from $3.50 a tonne.
Copyright Reuters, 2011