Asian diesel prices hit 5-year high

Asian diesel prices hit 5-year high

SINGAPORE (Reuter): Asian diesel prices have hit a five-year high as cold weather in other parts of the world has reduced supplies usually exported to Asia and regional demand remains strong, oil traders said yesterday.

Regional refinery and power problems and stronger crude oil prices in the United States and Europe have also pushed Asian crude and refined product prices higher, traders said.

Prices surged overseas after U.N. talks with Iraq on limited oil sales ended on Monday with no agreement. Iraq has been banned from exporting oil since it invaded Kuwait in 1990.

"Turnarounds (maintenance) at Middle East refineries in March also mean not many barrels are available and sustained cold weather in the U.S. and Northwest Europe are diverting cargoes from Asia," one trader added.

Refineries in Kuwait and Abu Dhabi will be shut for scheduled maintenance from March.

Traders said the diesel market was bullish worldwide with high heating oil prices in the United States and firm diesel futures prices on London's International Petroleum Exchange.

Startup problems or delays at new refineries in Thailand and South Korea were also squeezing supplies, they said.

On Thursday, a major European oil firm sold 240,000 barrels of 0.5-percent sulfur diesel to a Singapore trader at a five-year record of US$27.75 a barrel for March 8-12 lifting on a free-on- board (FOB) Singapore basis, traders said.

Early last week, a March cargo was sold at a record premium of 70 cents a barrel to Singapore spot quotes on an FOB basis, with current levels seen at 60-65 cents premium.

Prices have hit five-year highs twice in the last six weeks.

They peaked at $27.20 on Jan. 11 before plunging along with New York Mercantile Exchange (NYMEX) crude futures. Prices began recovering January 24 and hit $27.50 on Feb. 12.

The paper market also rallied on Friday with March gaining $1.50 over two days to be bid at $26.30 a barrel.

The closure of Skikda, Algeria's main port for oil products exports, also throttled supplies, traders said. State oil firm Sonatrach declared on Feb. 13 a force majeure on diesel liftings which is still in force, term lifters said.

This had no direct impact on prices, but as good quality diesel for South Korea can only come from Algeria and the United States, it has perpetuated bullish sentiment, a Japanese trader said.

Traders said the problem at Skikda might have forced South Korean refiners to buy two cargoes of 0.1 percent sulfur diesel for mid-March delivery at $2.20-$2.55 a barrel over Singapore spot quotes on a cost-and-freight basis.

Strong Asian demand continues to be led by India, which has bought a total of 3.2 million tons between January and March. India is expected to be a big buyer again for April.

Thailand is seeking up to 50,000 tons for delivery in March, after buying at least 150,000 tons for February. Some traders said Thailand might buy 300,000 tons for February and March after problems at two refineries soaked up diesel stocks.

A dry spell in Sri Lanka has disrupted the country's hydropower supply and forced it to seek 450,000 barrels in March for electric power generation, a Colombo source said.

Traders said current high prices have led Indonesia to keep its purchases discreet. But they said a scheduled shutdown at a reformer and a hydrocracker at the Balikpapan refinery in March might boost Indonesia's imports for that month.

Indonesia expects diesel imports for fiscal 1996/1997 (April/March) will rise by nine million barrels to 34.4 million barrels, working out to a monthly average of 2.8 million barrels, compared with 2.1 million in the previous year.