Middle East fuel oil supplies into East Asia for August are expected to fall drastically from high levels of the past two months, keeping the market strong amid easing demand from China, traders said on Friday. So far, only 400,000-450,000 tonnes of cargo from Saudi Arabia, Iran and Kuwait have been fixed for August arrival, down from more than 1 million tonnes for each of the last six months, Reuters data show. The tighter inflows were primarily due to less supplies from Iran, which had curtailed spot offers for July- and August-loading barrels due to disruptions to its domestic natural gas output. \"The lack of Iranian cargoes have also affected the Middle East players, who then need to find replacement barrels from other suppliers in the region and that has resulted in less cargoes coming East,\" a Singapore-based Western trader said. \"We can\'t compete for the cargoes if the Middle East-based guys want it because of the freight advantage that they have, and so far, they have taken almost all the sell tenders.\" Reflecting this, four of the last six offerings from Saudi Arabia have been awarded to Middle East players. The latest was ExxonMobil\'s regular high-viscosity offering from Yanbu the 90,000-tonne lot, for August 4-6 loading from the joint-venture Samref refinery, was sold to Bakri at a discount of $24.00-$25.00 a tonne to Singapore spot quotes on a free-on-board (FOB) basis. Saudi Aramco also sold three rare low-viscosity, low-density parcels of 90,000 tonnes each, all for lifting between second-half July and early August from Rabigh, to players with operations in the Middle East. Supplies from Kuwait have also been at below average volumes since June-arrival, with no more than a single 80,000-tonne parcel seen for each of the past two months, while no fixture has been seen for August-arrival as yet. The lower volumes are mainly due to Kuwait Petroleum Co (KPC) diverting some of its already-limited spot supplies to Pakistan, where demand has been very strong. More supplies are expected from the region, mainly from Saudi Arabia, which is expected to offer at least another five August-loading cargoes, totalling 450,000-500,000 tonnes, in line with its average monthly supply volumes of 500,000-600,000 tonnes, traders said. The uncertainty is how much of these volumes will flow into East Asia, with the Middle East market progressively strengthening, supported by strong demand from Pakistan and the Fujairah marine fuels market in the United Arab Emirates. \"It depends on how much volumes the Middle East guys want. We can only take cargoes that they are not interested in, due to the freight factor,\" another trader said. \"There are also quite a few players who have options both sides, like Vitol, Shell and Trafigura, and they have the flexibility to swing the cargoes eastwards if economics in the Middle East change.\" Cash premiums in the region have steadily risen to $7 (Dh25.69)-$8 a tonne to Middle East spot quotes, up from $3-$4, in the past two weeks, lifted mainly by strong demand from Pakistan, which is supplied mostly by Middle east-based traders. Import volumes for June hit a record high of about 850,000 tonnes on the back of severe power shortages in the country. The voracious demand is expected to continue in the near term, reflected by Pakistan State Oil\'s purchase of another 1.62 million tonnes, for August to October delivery, with Bakri accounting for the lion\'s share of 80 per cent of the total volumes. Compounding the supply squeeze in East Asia, Western arbitrage arrivals for August, at 3.1 million tonnes, are below average levels for a third straight month, amid a notionally-closed West-to-East arbitrage window. However, the downside is limited by the expectation of tepid demand from China, which mainly imports straight-run fuel oil as refinery feedstocks, for the rest of the third quarter, amid slowing domestic demand for gas oil and gasoline. China, which also imports bunker fuel from Singapore, had supported the market, buying an average of 2.36 million tonnes a month this year till June, the highest monthly average since 2004, when severe power shortages drove up demand. Reflecting the low-demand, low-supply scenario next month, fuel oil\'s prompt timespread has been largely rangebound at a backwardation of $2-$3 a tonne since the market entered the August pricing month, down from an average of $5.29 in June. From / Gulf News