Richard Melson

September 2006

Saudi Aramco

http://www.tradearabia.com/

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Singapore

Saudi Aramco, a major fuel oil exporter to East Asia, has imported its
first-ever cargoes of the residual fuel, taking a total of around 160,000
tonnes for August and September deliveries, to meet peak summer utility
demand amid a depressed global market, traders said on Friday.

The two 380-centistoke (cst) cargoes, for delivery to Rabigh, by the Red
Sea, were sold from Europe by a Western trader at a discount of around $15 a
tonne to Singapore spot quotes, on a cost-and-freight (C&F) basis.

'This is the first time ever that Aramco has actually bought fuel oil. It's
a case of optimisation -- the market has been poor and they have cut back on
their own production due to depressed prices in the face of peak summer
demand,' a Singapore-based Middle East trader said.

'It's cheap to buy but bad to sell. They are still producing fuel oil but
the volumes are not enough for domestic consumption so it makes sense, at
this time, for them go out to the market and buy.'

Both parcels, for second-half August and second-half September delivery, are
of unusually low-metals content and of maximum 3.5 percent sulphur.

Aramco had also called off plans to export two September-loading cargoes,
totalling 160,000-200,000 tonnes, from its Ras Tanura and Jubail refineries.

Traders said the refiner was producing less cracked fuel oil via secondary
units and could instead sell feedstocks such as straight-run fuel oil, which
fetch better prices.

'The Saudi refineries are quite sophisticated and they have that flexibility
to tinker with the configuration without impacting on their overall yield
volumes,' another source said.

'They can also sell the feedstocks, though I have not actually seen any of
them hitting the market as yet.'

The oil giant is the largest Middle East fuel oil supplier into East Asia,
exporting 600,000-800,000 tonnes each month from three plants -- in Yanbu,
Jubail and Ras Tanura
-- during the first-half of the year.

Exports normally fall in the third quarter when electricity demand peaks
during the sweltering summer season.

The unexpected demand for fuel oil is in line with increased demand for oil
products, mainly gas oil and gasoline, from the Middle East, particularly
among other oil-rich countries such as the United Arab Emirates and Qatar

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Saudi Aramco buys first-ever fuel oil cargoes

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Saturday, September 2, 2006