Pakistan PSO Gets Lower Fuel Oil Offers; PetroChina To Win 1st Time
06/20/2012| 04:48am US/Eastern
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--PSO pays lower premium for fuel oil in third quarter
--PSO buying 490,000 tons fuel oil, including likely first win for PetroChina
(Adds background on Pakistan's recent buys, traders comments on market structure and perceived need to buy fuel oil sooner than later)
By Gurdeep Singh
Pakistan State Oil will pay a slightly lower premium for 490,000 metric tons of fuel oil imports in the July-September quarter compared with its previous purchase, suggesting the Middle East market remains well supplied despite peak summer demand in the region that has curtailed outflows to Singapore.
The latest tender marks the first time Chinese oil giant PetroChina Co. (0857.HK) will likely supply a fuel oil parcel to Pakistan, in a sign of its expanding business that leverages its clout as one of the biggest fuel oil cargo movers in the East Asian market.
The potentially winning offers for high-sulfur fuel oil were around $35-$36 a metric ton above Middle East quotes, down from $36-$40/ton in PSO's previous tender. Offers for low-sulfur fuel oil were at a premium of $101-$105/ton compared with $109/ton in the last tender.
Traders said the decline in premiums could be partly due to the steep discount of distant contracts to prompt contracts in the regional market, termed backwardation.
"With backwardation getting stronger, there is a reason to move the oil now rather than later and the now drives the PSO values rather than later," said a Middle East-based fuel oil trader with a major.
Pakistan's fuel oil imports have been much lower this year than the record highs seen in 2011, as relatively moderate weather and high inventories reduced requirements for shipments from overseas. Demand is expected to peak as summer temperatures rise. The company bought only one out of the four LSFO cargoes that it had initially sought in its previous tender.
In the latest tender, PSO is set to buy three 65,000-ton HSFO cargoes from Bakri and one each from Trafigura and PetroChina. Gunvor was the lowest bidder for two 55,000-ton LSFO cargoes and Mercuria for one.
Write to Gurdeep Singh at gurdeep.singh@dowjones.com
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