Business | Oil & Gas
China turns to Kazakh fuel as prices jump
Kazakhstan has increased its fuel oil exports to China, accounting for an average of 2.5 per cent of total imports into Asia's top buyer this year, from less than one per cent in 2006, traders said yesterday.
- Reuters
- Published: 23:39 November 2, 2007
Singapore: Kazakhstan has increased its fuel oil exports to China, accounting for an average of 2.5 per cent of total imports into Asia's top buyer this year, from less than one per cent in 2006, traders said yesterday.
Average monthly volumes from the former Soviet state have doubled in August and September, as Chinese refiners seek direct and cheaper alternative supplies due to rocketing prices to records above $500 a tonne.
"The Kazakh fuel oil is yet another one that Chin-ese refiners have increasingly turned to in the past year for more supplies. We have seen regular imports from unusual sources such as the Philippines and Thailand and now it's Kazakhstan," a Beijing-based trader said.
Official data showed heftier imports of about 100,000 tonnes for August and 80,000 tonnes for Sep-tember from Kazakhstan, up from last year's average volume of 10,000 tonnes. Regional fuel oil started on its trek of record high prices in July.
Volumes
Traders expect Kazakh fuel oil volumes to be similarly high in October, as prices for the month averaged at its highest level on record at $445.55 a tonne for the benchmark 180-centistoke (cst) grade, 55 per cent higher than the same month a year ago.
The surging markets have forced Chinese refiners, particularly the smaller independents that use straight-run fuel oil as feedstock, to cut runs due to negative margins caused by state-set diesel prices and fuel oil imported at high international rates.
Their cuts have led to a shortage of diesel and widespread rationing, forcing the government to raise domestic prices by up to 10 per cent from Thursday.
Traders said Kazakh fuel oil is good quality straight-run residues with high cracking value and is sold at low prices due to high transportation costs from the landlocked country. It is marketed by PetroKazakhstan, majority-owned by PetroChina, from its Shymkent refinery.
The cargoes have a viscosity of below 100-cst, a sulphur content of less than one per cent and density of below 0.96, and are usually sold at fixed prices of $50-$100 a tonne, depending on the demand season. "It is usually brought into China through the border in the northwest by rail. Transportation is quite a lengthy and troublesome process," another trader said.
"The oil has to be transferred from the Kazakh rail cars to the Chinese ones at the border and it has to be heated during the transfer because of the cold temperatures there."
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