Saudi Aramco buys 400,000T diesel supplies for Mar-Dec

INVENTORY SECURITY: Saudi Arabia is short on diesel supplies on the Red Sea, forcing it to import the term barrels. (Getty Images)

Saudi Aramco bought 400,000 tonnes of gas oil for March to December supplies in a rare medium-term tender, amid declining spot prices in the Middle East, traders said on Monday.

The cargoes of 0.5 percent sulphur grade fetched a premium of less than $2.75 a barrel to Middle East spot quotes, on a cost-and-freight basis, they said.

"The sellers are aggressive," said a trader in Singapore.

The term tender was deemed unusual because Aramco used to buy spot barrels to make up a domestic shortfall especially during the summer months.

The premiums were locked in at a time of weakening Middle East spot diesel market, where prices had fallen to between parity and discount levels due to a global demand erosion, traders said.

"The premium is not too unreasonable if supplies are from Asia," one trader said.

Others said the cargoes are likely to come from India or the Middle East.

Saudi Arabia is short on diesel supplies on the Red Sea, forcing it to import the term barrels.

The country has been buying diesel on the spot market for at least over the last two years, thanks to petrodollar investment on road and building infrastructure.

Most of the spot diesel imports into the kingdom usually hail from the Mediterranean and sometimes from India and neighbouring countries in the Middle East when supplies from the West are limited.

Aramco also sells a regular cargo of heavy sulphur gas oil of more than 1.0 percent each month, which is used as a blending stock for fuel oil. (Reuters)

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