The world’s top oil exporter is also expected to import the residual fuel at the start of the second quarter — between two and four cargoes a month over the summer — as supply of alternative utility fuels tightened, they added.
“We are expecting them to cease their fuel oil exports earlier than expected, as they are anticipating the loss of gas to boost demand for utility-grade fuel,” said a fuel oil trader familiar with Saudi Aramco’s fuel oil exports.
Saudi Arabia has since 2006 bought spot fuel oil during the summer months — between June and September — when demand for power generation fuel spikes. But it had also bought cargoes for October last year, its first trades outside the peak period.
Aramco, which typically offers a total 250,000 to 300,000 tonnes of fuel oil monthly, comprising spot and term cargoes, had planned to halt fuel oil exports in the first quarter on rising requirements from domestic power plants.
“Aramco typically buys two or more cargoes and sells one cargo based on their optimisation strategy, so net-net, they end up with one or two cargoes,” said a regional fuel oil trader.
“They tend to keep the low-metal, low sulphur cargoes for their own use and export the higher metal, higher sulphur ones.”
Aramco usually adopts a strategy of importing cheaper fuel oil parcels from the Mediterranean and selling its cargoes for a higher price into Asia, depending on demand.
“At the end of the day, it’s all a matter of price economics between AG (Arab Gulf) and Singapore,” added another trader. Although fuel oil has typically been seen as a heavy pollutant with little benefit for domestic use, Saudi Arabia, along with Iran and Kuwait, have increasingly been burning larger quantities of fuel oil for power generation and water desalination, analysts said.
