Asia oil products 'firm' until March

Asia oil products 'firm' until March

SINGAPORE (Reuter): Diesel, jet-kerosene fuel and fuel oil in Asia are set to sustain their three-month old rally until early March 1996 on tight supplies and firm demand, trade sources said yesterday.

Diesel and kerosene prices, now at five year-highs, are causing anxiety among regional buyers such as Indonesia, Japan, India, Vietnam and Asian airlines. Buyers are finding it hard to find supplies, especially for January, even at high prices, and that is straining budgets.

Indonesia, hard-pressed to meet high kerosene prices, hopes to diversify its sources, a Pertamina official said. But traders said the global tightness left Indonesia few options.

Kerosene and diesel prices started rallying in October, after a series of regional refinery mishaps coincided with high seasonal demand.

"India's refinery problems might remain until early February, which has attracted large diesel imports," a trader at a major oil firm said. Japan's low refinery runs and high winter demand are continuing to soak up kerosene supplies."

Japanese refiners Cosmo Oil Co. Ltd. and Tonen would raise their crude runs to meet demand early next year, a Japanese refiner said.

But the refiner did not believe others would follow suit as domestic kerosene prices remained low, despite spiraling international prices, Most Japanese refineries had cut their runs by five to 10 percent in the fourth quarter, ahead of the country's oil industry deregulation next year and to help firm up domestic prices.

Traders said Korea's winter demand for kerosene remained firm, while Indonesia would continue to produce less kerosene until May because of limited storage at the Cilacap refinery.

Kerosene supplies in Singapore and the Middle East are scarce, while most cargoes from the U.S. and Caribbean have been committed to Japan and Korea. For example, Vietnam was told by two major oil refiners in Singapore that there are no kerosene in January and supplies for February and March are limited.

Cargo kerosene prices are testing US$32 a barrel for January, a level not seen since the 1990-1991 Gulf War. February remained firm at over $28 compared with $20.50 in mid-August.

Diesel prices have also topped $26 for January and $25 for February. The sustained firm prices are reflected by an offer for March paper diesel at $24.50, and a bid for the second quarter at $23.30, compared with $20.15 in October.

Diesel prices were boosted by India's total purchases of two million tons in January and February and projected import demand of 850,000 tons in March.

The middle-distillates and fuel oil markets were further helped by a fire on Wednesday that forced Singapore Refining Co. to cut its refinery capacity by 100,000 barrels per day (bpd).

Supplies in the first and second quarters may also be limited by Kuwait's phased shutdown of its three refineries.

But a Kuwait Petroleum Corp (KPC) official was reported to have said that the scheduled maintenance might not affect supplies to its customers. Traders said that KPC might be able to fulfill its term commitments but be hard pressed to meet spot demand.

Fuel oil prices reached a five-month high of $118 a ton for the 180-centistoke grade and traders expect it to test $120 soon. Demand was seen from India, China and Thailand as well as shipowners' emerging bunker needs after the Christmas holiday.