PSO to award fuel oil tender at higher prices

Pakistan State Oil seeks another 780,000 tons of fuel oil after buying it at premiums of $20-22 a ton last month.

SINGAPORE: Pakistan State Oil (PSO) is expected to award a tender to buy up to 780,000 tons of high-sulphur fuel oil for January-February delivery at higher prices, traders said on Tuesday.

Of the 10 firm 125-centistoke (cst) cargoes, Middle Eastern traders Bakri Trading and Fal Oil sold seven and three lots, of 65,000 tons each, at premiums of $26-29 a ton to Middle East spot quotes on a cost-and-freight (C&F) Karachi basis.

“Prices are higher this time round because they are buying only the 125-cst cargoes due to the winter, unlike in the past where they took both the 125-cst and 180-cst grades,” a Middle East-based trader said.

“The 125-cst grade is quite an uncommon grade to blend and the Middle East market has also been quite tight on cutters.”

PSO earlier bought similar cargoes last month at premiums of $20-22 a ton, as part of its previous tender where it purchased up to 960,000 tons for November-January delivery.

Traders said the Middle East market, which meets all of Pakistan’s fuel oil requirements, has remained balanced, but lacks lower-viscosity supplies, while East Asia is tight due to low inflows of western arbitrage cargoes for three months.

Reflecting the tight supply of cutters, the viscosity spread in Singapore has widened to around $10 a ton, rising from below $8 just two weeks ago. Western arbitrage inflows into East Asia for January are expected to total 3-3.1 million tons, staying below average for a third straight month.

Published in The Express Tribune, December 22^nd, 2010.