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Reliance offers more naphtha but non-petchem grade

Reliance Industries

is looking to sell more naphtha, bringing its total naphtha exports through tenders for August lifting at 185,000 tonnes, traders said, the highest monthly spot volumes offered by the company since February.

However, some 60 percent of the August volumes were considered off-specification as the grade does not meet the requirements of the petrochemical industry standard, the traders added.

It is unclear why Reliance’s naphtha contains more oxygenates than usual. Reliance officials were not available for immediate comment.

Reliance had offered the long-range tanker size cargo for end-August loading from Sikka Port in western India through a tender which closes on Wednesday.

But the cargo contains 100 parts per million (ppm) of total oxygenates, twice the acceptable amount for making petrochemicals.

The fuel, however, could still be used but only if buyers have the means to lower the oxygenates levels.

Reliance, which operates the world’s biggest refining complex at Jamnagar in western India, has already sold one such cargo with 100 ppm oxygenates to Vitol for early August loading at discounts to Middle East quotes on a free-on-board (FOB) basis.

Traders said the off-specification cargoes came at a time when European naphtha arriving next month in Asia was lower versus July.

Major oil trading firms stow diesel, jet fuel on supertankers as demand rebound eyed

Major oil trading companies are stowing diesel and jet fuel on newly built supertankers in Asia and Africa in anticipation of COVID-19 vaccinations driving prices higher in the months ahead despite the activity being less lucrative now than last year.

Trafigura, Glencore and Vitol are holding about 1.5 million tonnes of the industrial and aviation fuel on at least seven Very Large Crude Carriers (VLCCs) off Singapore, Malaysia, Sri Lanka and Africa, according to shipping sources and data from analytics firms Vortexa, Kpler and Refinitiv.

These storages are helping Asia hold back excess supplies and prevent added pressure on prices as China ramps up diesel exports from refining overcapacity while renewed lockdowns in India to curb the spread of COVID-19 threatens to cool fuel demand at the world’s third largest oil consumer.

“Given how narrow the current East-West arbitrage window is, I would expect traders to opportunistically load gasoil on newbuild VLCCs to head to the West, taking advantage of lower freight costs on a per barrel basis,” said Serena Huang, Asia lead analyst at Vortexa.

The exchange of futures for swaps (EFS), which determines the gasoil price spread between Singapore and Northwest Europe , has traded around minus $11 a tonne over the last month – a level that typically makes it unworkable for arbitrage shipments.

Gasoil arbitrage to the west is usually profitable when the EFS trades at about minus $15 a tonne or below, although it also depends on factors such as freight rates and voyage length, according to trade sources.

“We have seen a number of vessels being fixed to arb to the west (recently), but they have generally been VLCCs,” said Kevin Wright, Kpler’s lead analyst for Asia Pacific.

Unlike last year where traders profited from storing oil because of a wide contango structure, the prompt monthly price spread for the benchmark gasoil grade in Singapore has narrowed its contango structure by 55% in the last six months, Refinitiv Eikon data showed.

In a contango market, prompt prices are lower than those for future delivery, which tends to encourage holders of physical barrels to store them and sell later to secure higher prices. But, a narrowing contango indicates the market may flip back into backwardation – the opposite of contango that is usually seen as a sign that there is demand for the product currently.

Among the companies, Trafigura is the most active, chartering five of the seven VLCCs to load diesel from China and South Korea between March and April for UK, West Africa and Sri Lanka, the data showed.