fuel oil premium soars on middle east demand
Last Updated : GMT 02:22:00
Arab Today, arab today
Arab Today, arab today

Fuel oil premium soars on Middle East demand

Arab Today, arab today

Arab Today, arab today Fuel oil premium soars on Middle East demand

Mumbai - Arabstoday

The cost of fuel oil from India is set to double as rising temperatures and use by shippers drive Middle East prices to the highest level in almost three years. Cargoes for loading from June to August may climb to $5 (Dh18.35) a metric tonne above benchmark prices in Singapore, from about $2.50 in May and an average of $2 this year, according to a Bloomberg survey of five traders. High-sulphur fuel oil in the Middle East has jumped 33 per cent this year, compared with a 26 per cent gain in Dubai crude, a benchmark oil grade. Increasing demand for fuel oil, used to power ships and generate electricity for air conditioners, is helping Indian refiners as they seek to buoy earnings curbed by domestic price controls. Profit at Indian Oil Corp the nation\'s biggest refiner, which is forced to sell diesel below cost to local consumers, slumped 30 per cent in the fourth quarter. Asian processing costs, as measured by so-called crack spreads, are near the lowest in almost three months. \"It won\'t be difficult for India to find buyers for this fuel oil,\" said David Wech, head of research at JBC Energy GmbH, a Vienna-based researcher whose clients include Conoco-Phillips and Statoil. \"You have peak demand for power generation requirements in the Middle East.\" The average July temperature in Saudi Arabia, the Middle East\'s biggest economy, is 36 degrees Celsius (97 degrees Fahrenheit), more than twice as high as December, according to weather data compiled by Bloomberg. Prices for Middle East fuel-oil cargoes averaged $666.34 a tonne in April, trading at $680.75 on April 11, the highest level since July 2008, according to data compiled by Bloomberg. They were at $666.01 a tonne on June 9. Fuel oil is a residue from crude refining. Companies typically accept a loss from producing it because of the profit gained at the same time from higher-value products such as gasoline. Middle East fuel oil outpaced crude from June to August last year as demand rose, according to data compiled by Bloomberg. Prices for residues advanced 3 per cent over the four months, compared with a 0.4 per cent drop in Dubai prices. Mangalore Refinery & Petrochemicals, part of Oil & Natural Gas Corp, India\'s biggest oil explorer, sold 80,000 tonnes for June loading at $2.50 to $3 a tonne more than Singapore prices last month, the highest premium this quarter. The Mangalore-based company is offering a further 80,000 tonnes for loading in the second half of July in a tender that closed on Thursday. From / Gulf News

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