PSO defers diesel, fuel oil cargoes due to floods

Some traders say PSO had declared force majeure on two diesel parcels from Kuwait Petroleum Corp.

SINGAPORE: Pakistan State Oil (PSO) has delayed a few fuel oil and gas oil cargoes for August delivery due to the floods, with some traders saying PSO had declared force majeure on two diesel parcels from Kuwait Petroleum Corp (KPC).

“PSO is planning to defer a few high-sulphur gas oil cargoes for delivery in August and may be early September,” said an industry source familiar with the matter. “Transport lines in the country have been disrupted due to the floods, and PSO has ample inventories because the flood has reduced domestic fuel consumption,” he added.

PSO takes delivery of at least two 0.5 per cent sulphur gas oil cargoes, measuring between 30,000 and 50,000 tons, from KPC every month.

Traders said KPC had sold the deferred gas oil cargoes in the Middle East spot market over the last two weeks. KPC could also stockpile the oil ahead of the Muslim festive season next month.

“We heard KPC sold some cargoes because of the shipments that were deferred by Pakistan, so high-sulphur gas oil premiums in the Mid-East Gulf have collapsed,” said one trader.

Premiums for 0.2 per cent and 0.5 per cent sulphur gas oil have fallen below $1.50 a barrel to Middle East spot quotes this week, compared with $2-$2.50 a barrel last week, traders said.

Pakistan has also deferred two low-sulphur fuel oil (LSFO) cargoes for delivery in August, and may delay one or two high-sulphur fuel oil (HSFO) parcels, the industry source added.

“Pakistan doesn’t need so much fuel oil right now as the power plants are running at low capacity because of the floods,” the source added.

About one-third of the country has been hit by three weeks of devastating floods due to torrential monsoon rains, with waters stretching tens of miles from rivers. Apart from homes, the floods have swept away roads, bridges and telecommunications as well as reduced domestic fuel demand.

Published in The Express Tribune, August 21^st, 2010.