High LSWR stocks delaying liftings

High LSWR stocks delaying liftings

SINGAPORE (Reuter): Indonesia's low sulfur waxy residue (LSWR) stocks are rising as regional buyers failed to find outlets, curbing state-owned Pertamina from raising its September allocations, traders said.

Traders said the Platinum, a VLCC (very large crude carrier) used by Pertamina as a floating storage, has reached full storage. The vessel is anchored off northern Sumatra coast and south of Singapore.

"Barrels have backed up a bit," said a trader. "If buyers can lift pretty promptly, Pertamina has an additional 400,000 barrels to offer. But otherwise, it looks like Platinum will be having critical problems around Sept. 15-16."

Pertamina had scheduled 1.6 million barrels for lifting in September, half of which will be lifted in the first half of the month.

Traders said liftings were being delayed as traders could not find outlets for the barrels that were allocated to them by Pertamina.

They said weak regional demand, particularly from Japan has been the cause of the high stocks.

Japan, the biggest regional buyer of LSWR to generate power for airconditioners during summer, is only buying 1.2 million barrels, traders said.

They said after covering South Korean, Taiwanese and Indian demand, they saw a surplus of up to 1.5 million barrels over Pertamina's initial allocation of 3.6 million barrels.

The arbitrage into the U.S. refinery feedstock market, an alternative outlet for Asian LSWR was not open as northwest European straight-run fuel oil looked cheaper, a U.S. refiner said.

In addition, seasonal shutdowns at refinery cracker units in the U.S have dampened demand for feedstocks.

Traders said offers were as low as 50 cents per barrel over Pertamina's sale formula.

In comparison, August barrels fetched as much as a 75-cent premium.