Fuel oil eases, supply increases

Middle East benchmark prices for fuel oil eased this week, as increased volumes from regional suppliers and heavy western arbitrage flows into Asia weighed on the market.

Benchmark prices for fuel oil, which is commonly used as marine fuel and for power generation, was pegged at about 50 cents, down nearly $5 a tonne from end-March, when the Middle East market was grappling with tight supplies, traders said.

"The market is comfortable now, good supply flows, the Asian market has been overloaded with heavy flows from the West," a trader said.

Between March and April, fuel oil flows into Asia from Europe and Latin America averaged over 3.5 million tonnnes, traders said.

But arbitrage shipments are expected to steady out in May and June, according to a Reuters survey.

A total of 2.8 million tonnes of fuel oil is expected to hit Asia in May, with June pegged at about 1.5 to 2 million tonnes, traders said.

The Asian fuel oil discount versus Dubai crude has improved to around $7-$8 a barrel this week, narrowing from around $8 a barrel earlier this month, traders said.

Middle East gasoline demand continues to be driven by strong demand from Saudi Arabia, the world's top oil exporter and Iran, the world's fifth-largest oil exporter.

Saudi Arabia is expected to be buying around 10 to 11 cargoes each of about 30,000 tonnes for April, while Iran has already started its purchasing programme for May.

The Islamic republic, which is facing the threat of sanctions by the West over its nuclear programme, has already purchased up to 8 cargoes of the motor fuel.

Most of the cargoes were purchased from French energy giant Total.