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Pakistan State Oil (PSO) is expected to confirm the purchase of up to 780,000 tonnes of 125-centistoke (cst) fuel oil for January-February delivery, market sources said.

Pakistan's leading oil marketer is reported to have already closed 10 high sulphur 125-cst cargoes of 65,000-tonnes each, buying seven from Saudi Arabia's Bakri Trading and three from UAE-based FAL Oil at higher premiums than last month.

The cargoes are said to have been bought at premiums of $26.00-$29.00 per tonne to Middle East spot quotes on a cost-and-freight (C&F) basis with the parcels due to be delivered in Karachi.

Last month PSO closed a deal at lower premiums of $20.00-$22.00 per tonne when it bought up to 960,000 tonnes of fuel oil for November-January delivery.

According to local sources, the higher premiums paid are due to the fact that 125-cst grade fuel oil is quite an uncommon grade to blend and the Middle East market has been quite tight on cutter stock. Also, this time PSO is purchasing only 125-cst cargoes instead of a combination of both 125-cst and 180-cst grades.

In order to meet power generation demand, PSO typically purchases 500,000-800,000 tonnes of fuel oil per month from Middle East suppliers such as FAL Oil and Bakri.

The Middle East market has remained relatively balanced in recent weeks, but is said to lack lower-viscosity grades due to the tight supply of cutter stock.

In East Asia, meanwhile, supplies remain tight due to a decrease in Western arbitrage cargoes in three consecutive months.