Kuwait sells 80 tonnes of fuel oil at lower price

Kuwait Petroleum Corp (KPC) has sold its first fuel oil cargo in two months, a cracked 380-centistoke (cst) parcel for September loading at steeply lower price levels, traders said on Wednesday.

The 80,000 tonnes cargo, for lifting on Sept. 1-2 from Kuwait, was sold to a Middle East player at a discount of $1.50-$2.50 a tonne to Middle East spot quotes on a free-on-board (FOB) basis, down from a premium of $3.00-$4.00 previously.

Traders said while supplies are tighter than the last three months, inflows have been imbalanced between high-viscosity barrels and cutters, reducing demand for cargoes that need to be blended down.

"It's a big drop from the previous deal - physical premiums are dropping like stones and marginal quality barrels, like these KPC cargoes, are the ones that are hit first," a Singapore-based Western trader said.

"The KPC cargoes typically need to be blended down before they can be sold into the retail bunkers market and cutters are expensive. I doubt anyone in this part of the market showed anything resembling a competitive bid."

KPC last sold a similar parcel, for early July loading, at a premium of $3.00-$4.00 a tonne to Middle East spot quotes, FOB, and did not sell any August-loading parcels.

Cash differentials for both the 180-cst and 380-cst grades are at a discount, with the former slipping into the red on Monday and the 380-cst grade falling to a month low of minus $1.13 a tonne on the same day.

The lack of cutters have also widened the August viscosity spread, the price difference between the two grades, to above $10.00 a tonne for the past three sessions, rising unabatedly from below $6.00 just over a month ago.

The lack of cutters resulted from thinner Western arbitrage inflows this month, at three-month low volumes of 3.1-3.2 million tonnes.

Volumes from Saudi Arabia, the region's top exporter, were also low at 300,000-350,000 tonnes for August loading, down from monthly average levels of around 500,000 tonnes, due to seasonal peak summer demand.