Iran has offered its first supertanker-load of low-density, low-water fuel oil, totalling 270,000 tonnes, in six months, with the parcel expected to land in East Asia in December, traders said on Tuesday, Reuters reports. The total December-loading volumes from Iran to East Asia is expected to be at 650,000-700,000 tonnes, its highest since June, including the current parcel and another 4-5 straight-run lots of 80,000 tonnes each.
Traders expect the higher Iranian volumes to temper the strength of the Asian market, which had been surging over the past two months, with cash differentials and prompt timespreads holding firmly at double-digit premiums.
"The Iranian barrels will address some of the quality issues that has been fundamental to the market's meteoric rise of the past two months," a Singapore-based Western trader said.
"The biggest issue here has been a lack of density cutters and an abundance of high-water cargoes. The Iranian barrels will at least address both those problems, though the market may take some time to correct downwards, given the prevailing bullish pricing agendas."
Reflecting this, the market has eased downwards, with its prompt December/January timespread falling to a month-low backwardation of $10.00 a tonne, down from $16.00 about a week ago, while cash differentials for the benchmark 180-cst grade has slipped to around $13.00 a tonne to spot quotes, down from its peak of above $16.00 at the start of the month.
The National Iranian Oil Co (NIOC) has offered the cargo, a combination of about 200,000 tonnes of its 380-centistoke (cst) grade from Bandar Abbas and another about 70,000 tonnes of straight-run 280-cst from Bandar Mahshahr, to its term lifters in East Asia.
Traders said NIOC was asking for premiums of $14.00-$15.00 and $24.00-$25.00 a tonne to Singapore spot 180-cst quotes respectively for the 380-cst lot and the straight-run parcel, both on a cost-and-freight (C&F) Singapore basis.
DEC VOLS HIGHEST IN 6 MTHS
"The price that the Iranians are demanding is quite high for the cargo, given how strong the market has been here. But not many are willing to meet their valuation, as the market has come off over the last few days."
As had been the case in the past, the parcel is sold on a cost-and-freight (C&F) basis and delivered by a Very Large Crude Carrier (VLCC) from the National Iranian tanker Co's (NITC) fleet.
Traders said the Hamoon has been earmarked to deliver the cargo, expected to land Singapore in early December, with the vessel currently anchored off Iran's Kharg Island, where it usually conducts Ship-To-Ship transfer operations.
NIOC last sold spot fuel oil on board VLCCs into East Asia for June-delivery, which saw the unprecedented arrival of three supertankers and with the month's total volume at an all-time high of more than 1 million tonnes.
Exports from the country then fell drastically between July and September, to less than 350,000 tonnes for each month, with even term lifters having their allocations cut, as disruptions to its natural gas supplies forced the country to use more fuel oil as an alternative power-generation source.
NIOC's full term volumes, of 4-5 straight-run parcels of 80,000 tonnes each loading from Bandar Mahshahr, were restored from October-loading onwards, and resumed offering spot cargoes last month, selling 80,000 tonnes of 380-cst from Bandar Abbas for November-delivery. Its term lifters include oil major Shell, Singapore trader Kuo Oil, China's Tianbao and European trader Vitol, who buy the straight-run cargoes both for blending purposes and as refining feedstock.
Traders expect the higher Iranian volumes to temper the strength of the Asian market, which had been surging over the past two months, with cash differentials and prompt timespreads holding firmly at double-digit premiums.
"The Iranian barrels will address some of the quality issues that has been fundamental to the market's meteoric rise of the past two months," a Singapore-based Western trader said.
"The biggest issue here has been a lack of density cutters and an abundance of high-water cargoes. The Iranian barrels will at least address both those problems, though the market may take some time to correct downwards, given the prevailing bullish pricing agendas."
Reflecting this, the market has eased downwards, with its prompt December/January timespread falling to a month-low backwardation of $10.00 a tonne, down from $16.00 about a week ago, while cash differentials for the benchmark 180-cst grade has slipped to around $13.00 a tonne to spot quotes, down from its peak of above $16.00 at the start of the month.
The National Iranian Oil Co (NIOC) has offered the cargo, a combination of about 200,000 tonnes of its 380-centistoke (cst) grade from Bandar Abbas and another about 70,000 tonnes of straight-run 280-cst from Bandar Mahshahr, to its term lifters in East Asia.
Traders said NIOC was asking for premiums of $14.00-$15.00 and $24.00-$25.00 a tonne to Singapore spot 180-cst quotes respectively for the 380-cst lot and the straight-run parcel, both on a cost-and-freight (C&F) Singapore basis.
DEC VOLS HIGHEST IN 6 MTHS
"The price that the Iranians are demanding is quite high for the cargo, given how strong the market has been here. But not many are willing to meet their valuation, as the market has come off over the last few days."
As had been the case in the past, the parcel is sold on a cost-and-freight (C&F) basis and delivered by a Very Large Crude Carrier (VLCC) from the National Iranian tanker Co's (NITC) fleet.
Traders said the Hamoon has been earmarked to deliver the cargo, expected to land Singapore in early December, with the vessel currently anchored off Iran's Kharg Island, where it usually conducts Ship-To-Ship transfer operations.
NIOC last sold spot fuel oil on board VLCCs into East Asia for June-delivery, which saw the unprecedented arrival of three supertankers and with the month's total volume at an all-time high of more than 1 million tonnes.
Exports from the country then fell drastically between July and September, to less than 350,000 tonnes for each month, with even term lifters having their allocations cut, as disruptions to its natural gas supplies forced the country to use more fuel oil as an alternative power-generation source.
NIOC's full term volumes, of 4-5 straight-run parcels of 80,000 tonnes each loading from Bandar Mahshahr, were restored from October-loading onwards, and resumed offering spot cargoes last month, selling 80,000 tonnes of 380-cst from Bandar Abbas for November-delivery. Its term lifters include oil major Shell, Singapore trader Kuo Oil, China's Tianbao and European trader Vitol, who buy the straight-run cargoes both for blending purposes and as refining feedstock.