Bearish news to dominate oil product market

Bearish news to dominate oil product market

SINGAPORE (Reuters): Indonesia's decision to cut oil imports in February and March will give another blow to Asia's bearish oil product market, which has seen little demand during the region's economic crisis, traders said yesterday.

Indonesian state oil company Pertamina said last week its oil product imports might grind to a halt in March to help stop a drain on foreign exchange.

"We expect to import half of our monthly average of 150,000 barrel per day (bpd) in February and we expect zero imports in March," a Pertamina director, Samto Utomo said last week.

Although the cut was no surprise to the market, oil product prices would still come under strong pressure as international oil markets head into the second quarter, traders said.

Seasonal oil demand and prices traditionally fall in the second quarter with the onset of warmer weather in the northern hemisphere.

Due to the economic crisis in Asia, the U.S. Department of Energy (DOE) last week reduced its monthly forecast for oil demand this year in Asian countries -- excluding China and Japan -- by 300,000 barrels to 9.1 million barrels per day.

The DOE also lowered its 1999 forecast for oil demand in the region by 500,000 barrels to 9.5 million barrels a day.

Traders were not optimistic despite gains in Asia's fuel oil market last week.

The market was bought up by one Middle East trader and a local trader to $61 per ton from $53 for the 180-centistoke grade, but the absence of buyers on Thursday and Friday quickly pulled prices down again.

"There is no change in fundamentals. There is still a lot of oil and there is still no enduser demand," said one trader.

Singapore's weekly residues stocks rose by 7,000 barrels in the period between Jan. 26 and Feb. 4 to 10.503 million barrels, the Singapore Trade Development Board said.

Although the buildup was smaller than in previous weeks, traders said the level was still high and there was no immediate demand to absorb the stocks significantly.

The gas oil market found a new floor late last week as buyers emerged to support the market despite reduced regional demand, but traders said the market was still adjusting to news that no import from Indonesia for March.

Traders said they expected prices to come under renewed selling pressure despite the latest support.

At the light end of the barrel, the market was also flush with both naphtha and gasoline, while buyers were few and far between, traders said.