0
SINGAPORE: Pakistan has imported less than 400,000 tonnes of fuel oil for October, its lowest volume in six months, as transport problems due to heavy flooding hit demand, official data showed on Monday.
The country's main buyer, Pakistan State Oil, also bought the lowest volumes, at 780,000 tonnes, for its usual three-month cycle, just about a month ago.
However, the lower demand is seen as a near-term issue, caused by immediate transport problems, and is expected to pick up by the next tender cycle, as the country has not been generating enough electricity to meet domestic needs.
“The lower demand is a result of surplus supplies from the previous tender cycle, when it bought nearly 1.5 million tonnes, which was a result of the heavy flooding in the third quarter,” a Middle East-based trader said.
“The floods basically disrupted the land transport system and there were a lot of difficulties in moving the oil from the ports in the south to the power plants in the north. Plus, the heavier rains also resulted in more hydropower generation.”
Despite the lower imports, traders expect Pakistan's import volumes to return to average levels at about 600,000 tonnes per month by the next tender cycle.
They said the country's electricity infrastructure is still not generating enough power to meet the consumption needs of its growing population, of around 18,000 Megawatts (MW), resulting in frequent blackouts of more than 10 hours a day for weeks at a stretch.
Despite the six-month low import volumes, the monthly average volume, at about 605,000 tonnes, is still its highest on record, up nearly 10 per cent from last year's average of about 550,000 tonnes, Reuters data shows.
The October import volumes, at about 382,500 tonnes, are comprised of more than 80 percent of high-sulphur cargoes and the rest are low-sulphur lots (LSFO), down about 45 per cent from month-ago volumes.
In line with the lower demand, PSO bought 12 high-sulphur fuel oil cargoes of 65,000 tonnes each for November-January delivery, its lowest purchase volumes since buying January-March parcels at the end of last year.
It is also seeking three LSFO cargoes of 60,000 tonnes each, for December-January delivery via tender, which closes on Dec. 5.
Most of Pakistan's requirements are supplied by traders based in the Middle East, due to freight advantages resulting from their the proximity to the country, versus East Asian players.
Traders said Pakistan's buying could have also been curbed by a very strong fuel oil market, particularly in East Asia, over the past two to three months, which has seen cash differentials soaring to record-high double-digit premiums and prompt timespreads surging into a steep backwardation.
At midday Monday, the prompt December/January timespread was valued at $10.00 a tonne, while the cash premium for the benchmark 180-cst grade was at $13.25 a tonne to Singapore spot quotes at Friday's Asian close.
