Japanese demand spurs RI's Minas crude
Japanese demand spurs RI's Minas crude
SINGAPORE (Reuters): Recent disruptions to gas output in Indonesia have proved a boon for the country's Minas crude oil exports, as hungry Japan power plants eye the grade as an alternative fuel, traders said on Tuesday.
Japan utilities, keen to secure fuel stocks ahead of the peak demand summer months, are considering taking extra barrels of Minas for May, which has led to the crude's premium versus the official selling price (OSP) to jump to about 50 cents a barrel.
Minas now stands at the highest premiums over OSP for at least four months and was trading at a discount to the OSP at the start of the year.
"Most utilities and refiners have to build burning fuel stocks before the summer in June and July, but this year the Indonesia LNG plant outage could be a main factor for them to start early," one Tokyo-based trader said.
Japan has been scrambling since mid-March for alternative fuel sources for power generation after LNG supplies from Exxon Mobil were curtailed when the company closed gas fields in Indonesia's Aceh province due to security concerns.
Sentiment for the medium sweet crude is further made bullish by the small size of the spot market, most term contract buyers do not resell their cargoes.
Major sellers, Chevron and Texaco -- which jointly own Minas field operator Caltex Indonesia, were due to offer a total 500,000 barrels for May.
The crude normally trades in small parcels of between 50,000 and 150,000 barrels.
Traders said Indonesia's state oil company Pertamina is unlikely to see any great benefit from higher Minas premiums because it exports mostly on term contracts, which were fixed at about ICP +30 cents this year.
Pertamina may also be hampered from offering extra Minas barrels for May because its Balongan refinery is due to restart at the end of March after a scheduled maintenance closure.
Minas and Duri crudes make up to 60 percent of Indonesia's total crude production of just under 1.3 million barrels per day.
Traders said unlike Minas, the Duri market was lacklustre.
Korean utilities, which can use the heavier Duri crude for burning, have not been seen raising import demand so far.
Japan rarely buys Duri as the grade's specifications are unsuitable.
Oil price
Meanwhile, oil prices held firm on Tuesday as the market continued to focus on U.S. stocks of gasoline. Fresh data due later in the day was expected to show a renewed draw in U.S. inventories.
North Sea bellwether Brent crude climbed 20 cents in opening dealings while U.S. benchmark light crude traded six cents off at $27.42 a barrel.
Crude has gained almost one dollar in the last two sessions amid rising concerns that lean gasoline stocks in the world's biggest energy consumer will lead to a repeat of last year's spike in U.S. pump prices.
A top U.S. oil executive warned on Tuesday of a potential gasoline supply crunch in the months ahead.
"We are going to have problems with gasoline...because of different specifications" due to environmental regulations, Archie Dunham, head of Conoco Inc, told an industry conference in Dubai.
"There could be a fundamental shortage," said Dunham, who leads the fourth largest U.S. oil company.
Gasoline prices hit record levels in 2000 as refiners scrambled to meet new environmental requirements for cleaner- burning grades just as U.S. motorists hit the road for summer vacations.