Gas oil prices up despite stock build

Gas oil prices up despite stock build

SINGAPORE (Reuter): Singapore gas oil market continued its relentless rally yesterday as another 600,000 barrels were traded despite initial concerns over the huge build in Singapore's middle-distillate stocks, traders said.

"Indonesia has been buying like nothing," one trader said. "They bought two cargoes today."

One of Indonesia's affiliates bought one cargo a day earlier.

Traders said the fact that Indonesia's two affiliates bought openly in the Singapore market, which is an unusual strategy for the normally reticent buyers, might indicate that they require a lot more than initially believed.

Traders said the Indonesian buyers might have thought that prices would remain at the low US$22.10-level that was traded on Tuesday and the 55-cent discount to Singapore spot quotes that one of them managed to get on Wednesday.

But Indonesia's sudden emergence excited the market, which had been undergoing a relatively slow period due to the continued absence of China.

China's absence and the high stocks of jet fuel contributed significantly to a 1.266-million-barrel build in Singapore's middle distillate stocks to 13.051 million barrels for the week ended Sept. 3.

But after a brief reticence after the stock data was reported, which saw gas oil swaps values trimming off a few cents from its earlier highs, the physical market brushed off the high stocks to trade above the $23.00 mark.

One of the Indonesian affiliates bought a cargo from a European major at $23.30 per barrel for Sept. 19-23 lifting free- on-board (fob) basis. A second Indonesian affiliate bought from another European major at the same price for Sept. 20-24 lifting.

These deals are 40 cents higher than the highest-priced trade on Wednesday.

The first European major then sold to another major at a high $23.70 for Sept. 26-30, and immediately locked in a 20-cent profit when the former bought at $23.50 from a Singapore trader for the same lifting period, traders said.

Jet fuel saw only sellers offering as high as $22.50 for late September lifting. But traders said that after the $21.75 deal on Wednesday, buyers were not impressed with the higher levels.

Traders said those holding jet fuel in storage are still bent on reaping a profit due a possible increase in demand in the fourth quarter.

But they said that this also carried a risk if demand did not pick up especially if the winter in Northeast Asia proves to be a mild one.