Essar sells Feb fuel oil at fixed price

SINGAPORE, Feb 9 (Reuters) Essar Oil sold a rare spot fuel oil cargo at unusual fixed-price terms after its new fluid catalytic cracker (FCC) started up last month, traders said on Friday.

The 20,000-tonne parcel of 180-centistoke (cst) fuel oil, was sold to Middle East trader Bakri at 0-5 a tonne on a free-on-board (FOB) basis for Feb. 20-25 loading from the refiner's northwestern Kandla terminal.

Traders expect the cargo, of 0.98-density and 1.5 percent sulphur, to be used as blendstock in the Fujairah marine fuels market in the United Arab Emirates where Bakri has storage facilities.

"It's very uncommon for deals to be done on fixed-price basis because it removes the ability to price to your advantage," a Singapore-based Asian trader said.

"I can only imagine that Essar wanted to have it on fixed, instead of floating, price because of the market's recent volatility." The last fixed-price transaction was seen was about a year ago, when Philippine refiner Petron Corp. sold a 380-cst parcel to Vitol amid a rapidly-rising market at the buyer's request.

Asian fuel oil cargo premiums surged to record-highs earlier this week amid an acute supply shortage in first-half February, and is expected to ease from the second-half onwards.

Premiums for the benchmark 180-cst grade closed at .70 a tonne to spot quotes on Thursday, down from Monday's all-time high of .90.

There are also signals that pricing activities, which had driven differentials and the prompt timespreads to record-highs, have reversed direction, just ahead of the anticipated wave of Western arrivals.

The current sale is only Essar's second for fuel oil after it sold a January-loading lot to another Middle East trader, FAL Oil, at undisclosed prices.

Essar is expected to offer cargoes regularly after its 2.9 million tonnes per year (tpy) FCC becomes fully operational by the end of the month.

Before the FCC was started, the highly complex refinery in Vadinar in the western state of Gujarat, had yielded straight-run vacuum gas oil (VGO) as residue, which the refiner sold mostly to the United States.

The VGO parcels are now used as feedstocks into the FCC, yielding lower-grade fuel oil.

The SINGAPORE, Feb 9 (Reuters) Essar Oil sold a rare spot fuel oil cargo at unusual fixed-price terms after its new fluid catalytic cracker (FCC) started up last month, traders said on Friday.

The 20,000-tonne parcel of 180-centistoke (cst) fuel oil, was sold to Middle East trader Bakri at $300-$305 a tonne on a free-on-board (FOB) basis for Feb. 20-25 loading from the refiner's northwestern Kandla terminal.

Traders expect the cargo, of 0.98-density and 1.5 percent sulphur, to be used as blendstock in the Fujairah marine fuels market in the United Arab Emirates where Bakri has storage facilities.

"It's very uncommon for deals to be done on fixed-price basis because it removes the ability to price to your advantage," a Singapore-based Asian trader said.

"I can only imagine that Essar wanted to have it on fixed, instead of floating, price because of the market's recent volatility." The last fixed-price transaction was seen was about a year ago, when Philippine refiner Petron Corp. sold a 380-cst parcel to Vitol amid a rapidly-rising market at the buyer's request.

Asian fuel oil cargo premiums surged to record-highs earlier this week amid an acute supply shortage in first-half February, and is expected to ease from the second-half onwards.

Premiums for the benchmark 180-cst grade closed at $7.70 a tonne to spot quotes on Thursday, down from Monday's all-time high of $10.90.

There are also signals that pricing activities, which had driven differentials and the prompt timespreads to record-highs, have reversed direction, just ahead of the anticipated wave of Western arrivals.

The current sale is only Essar's second for fuel oil after it sold a January-loading lot to another Middle East trader, FAL Oil, at undisclosed prices.

Essar is expected to offer cargoes regularly after its 2.9 million tonnes per year (tpy) FCC becomes fully operational by the end of the month.

Before the FCC was started, the highly complex refinery in Vadinar in the western state of Gujarat, had yielded straight-run vacuum gas oil (VGO) as residue, which the refiner sold mostly to the United States.

The VGO parcels are now used as feedstocks into the FCC, yielding lower-grade fuel oil.

The $2.2 billion facility is currently operating at 150,000 barrels per day (bpd) and will rise to 210,000 bpd when fully operational by April.

REUTERS PV PM1411 .2 billion facility is currently operating at 150,000 barrels per day (bpd) and will rise to 210,000 bpd when fully operational by April.

REUTERS PV PM1411