Singapore: PetroChina bought a rare small fuel oil cargo from India for end July at strong price levels, signalling that its months-long supply woes are not over, traders said on Thursday.
The 30,000-tonne lot of 380-centistoke (cst) fuel oil, for 20-22 July lifting from the Vizag port, was bought from Hindustan Petroleum Corp Ltd (HPCL) at a discount of $15.00-$16.00 a tonne to Singapore spot quotes on a free-on-board (FOB) basis, up from minus $24.00-$25.00 from a previous deal.
HPCL also sold another similar cargo, for the same loading dates from the western port of Mumbai to oil major Shell at a discount of $19.00-$20.00 a tonne spot quotes, FOB.
“It’s very unusual for PetroChina to be interested in these kinds of peanut-sized cargoes, as their demand-supply system is very large,” a Singapore-based Asian trader said.
“I have not seen them pick up this kind of a cargo in the 4-5 years that they have been active in the fuel oil market and it could only mean that their supply problems are continuing.”
The Chinese major’s first purchase of fuel oil from India was in May for an end-June cargo.
The latest purchase indicates PetroChina’s water specification issues with Venezuelan exports aren’t over, traders said. Venezuelan supplies average 800,000-850,000 tonnes per month, they said.
The water threshold is typically 0.5%, and most of PetroChina’s Venezuelan cargoes have been at 0.7%-0.8% since the fourth quarter last year.
The Indian cargoes, of up to 0.5% water content, are also typically low on metal content, particularly vanadium, which are usually high in the ones from Venezuela, traders said.
The Chinese major is the largest fuel oil trader in Asia, by volume, with 800,000 to 1 million tonnes of total inflows, mainly from the Caribbean and the US Gulf Coast, as well as some ad-hoc barrels from Iran.
Its main outlet is the Singapore marine fuels market, the world’s largest with about 3.5 million tonnes of demand each month, of which PetroChina has a market share of 20%-25%, trading from its storage terminals in the city-state that have a capacity of 500,000-550,000 cubic metres.
It also sells cargoes to marine fuel suppliers in Hong Kong and deliver fuel oil into its domestic supply system in China.
Due to its large supply of raw cargoes, similarly large volumes of blendstocks are needed for blending, traders said.
“The Indian cargo they bought is small, and that could imply that they need less to blend, meaning either the quality of their raw cargoes is better or they have less volumes arriving,” another trader said.