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Mon 6 Apr 2009, 08:01 GMT

Europe buys fuel oil cargo from Middle East


380-cst parcel bought to meet bunker demand as refiners cut fuel oil production.

Saudi Aramco has reportedly sold its first-ever cracked fuel oil cargo to Europe in order to meet local bunker demand, Reuters reports.

An 80,000-tonne parcel of 380-centistoke (cst) fuel oil is said to be scheduled for loading on April 18-20 from Saudi Aramco's Jubail refinery after having been sold to a European refiner at a discount of $8.00 - $10.00 per tonne to Singapore spot quotes, on a free-on-board (FOB) basis.

The decision by the unnamed firm to import fuel oil from Saudi Arabia follows news that a number of European refineries have begun to cut production of fuel oil due to poor margins and demand.

France's Total, Europe's largest refiner, has already said it will shut a quarter of its capacity at the 343,000 barrels-per-day (bpd) Gonfreville plant, the biggest in France. Overall, the company says it will close 10-20 percent of its overall 1.4 million barrels per day (bpd) of capacity at its eight refineries in France, Germany and the Netherlands.

Swiss-based Petroplus has said it will turn its UK Teesside plant into a depot if it cannot find a buyer and Italy's ENI plans to sell its Livorno plant.

The reduction in fuel oil capacity in Europe is also set to lead to a reduction in fuel oil cargoes to Asia, as Western cargoes make up the largest source of supply to Asia, the largest consumer of high-sulphur fuel oil.

Western arbitrage cargoes during the month of April have been estimated at 3.5 million tonnes, whilst the figure is expected to fall in May to below 3.0 million tonnes.

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