Dubai: Middle East fuel oil prices eased this week as the regional supply situation improved with fresh inflows from Saudi Arabia, the world's top oil exporter.
Benchmark prices were pegged at around $1 (Dh3.67) to $2 a tonne, down more than $6 from levels seen at the end of March, traders said.
"The market has been getting better over the past couple of weeks, we see the supplies from Saudi finally finding its way into the market," an Asia-based trader said.
"There is also oversupply in Asia with heavy western flows and this is adding to the pressure on the market."
About 4.25 million tonnes of high-viscosity fuel oil from the West are expected to be shipped into Asia this month, traders said.
The cargoes are mainly from Russia and Latin America, traders said.
The Western arbitrage flows are at a five-year high and will likely depress an already weak fuel oil market.
"For a year fuel oil has been enjoying some good fortune, that seems to be changing now and we could very well return to double digit discounts later in the year," a trader said.
Saudi Arabia sold 170,000 tonnes of end-April loading fuel oil which are mostly expected to stay in the region, traders said.
Total fuel oil sales from Saudi Arabia this month including parcels from its joint-venture partner ExxonMobil was around 450,000 tonnes, well above the 300,000-350,000 tonnes sold in March.
"Let's not forget that we are going into the spring, so Iran will start to offer fuel oil into the spot market, this will further push regional prices down," an Asian trader said.
Iran typically curbs fuel oil exports during the winter as it keeps the heavy oil for domestic power generation requirements.
Meanwhile, Kuwait Petroleum Corporation (KPC) has sold around 75,000 tonnes of naphtha for May delivery at premiums relatively steady to deals concluded previously, traders said.
Regional benchmarks were pegged at around $16 to $18 a tonne premium to benchmark prices, traders said. The market has stemmed its slide due to unexpected demand from Taiwan's Formosa Petrochemical Corporation.
However, the market still remains under pressure from heavy selling by Indian refineries.
"We are seeing healthy flows from India and there isn't demand out there to soak it all up, at least for now," a trader said.