CAPITALS: Price of Kuwaiti crude oil price increased 11 US cents reaching the level of 77.49 US dollars per barrel (pb) in the Thursday trading compared to Wednesday.
Price of the crude, at present, is on an upward track due to the bearish inclination of the rate of the US dollar in the international markets and reÜjump of the speculators into the oil market arena, anew, analysts told Kuwait News Agency (KUNA). Conventional market variables and factors, namely the variation between supply and demand are not to be attributed for the new wave of the bullish prices of the crude.
Organization of the Petroleum Exporting Countries (OPEC) says some of the top hot issues remain; high levels of speculation in the energy stock exchanges and global market turmoil.
OPEC is seeking to keep the price of oil barrel between $70Ü$80 to achieve a balance between interests of producers who need to finance spending on the development schemes and those of the consumers, suffering from downturn largely because of the global financial crisis. The current price of the Kuwaiti crude is within the range targeted by OPEC countries, also a good low compared to the level it reached early this year, $32 pb, down from $136 in July 2008.
Meanwhile, Kuwait Petroleum Corp (KPC) has for the first time cut its term naphtha offer to $13 a ton premium, despite sealing a deal with one buyer at a higher price which would have been normally agreed by others, traders said on Friday. The latest offer has been accepted by three buyers, but their identities were not known, trade sources said.
"KPC''s fullÜrange naphtha is especially popular with some petrochemical makers," one trader said.
The sources said that despite the latest acceptance, more termination of the contract may have also taken place after the revision, but this could not be immediately verified. Japanese trading houses Marubeni and PetroÜDiamond DecemberÜNovember contracts were terminated recently when the talks were ongoing, traders said. KPC''s latest oneÜdollar reduction from the premium agreed with Taiwan''s CPC this week, could have been prompted by strong resistance from customers including South Korea''s Hanwha and YNCC, Japan''s Mitsui Chemical and Maruzen as well as India''s Haldia Petrochemicals, traders said. This unprecedented move could affect rival Abu Dhabi National Oil Co''s (ADNOC) ongoing term talks, as it usually takes its cue from KPC, Asia''s secondÜlargest naphtha supplier after Saudi Arabia.
"This is the first time KPC had made such a move. In the past, once a buyer accepts a price, that''s final and there will be no room for negotiation," said a trader.
The latest cut for KPC''s December 2009ÜNovember 2010 naphtha supplies is the fourth since talks began on Oct. 12. It kicked off the offer at $19 a ton premium to Middle East quotes, on a freeÜonÜboard (FOB) basis, and the latest came a day after CPC accepted its offer at a $14Üpremium.
"But this time round, the resistance was rather strong, with highest bids capped at $12.00 a ton premium," a second trader said.
It remains to be seen if the acceptance by the three buyers at the $13Üpremium will also prompt others to agree. Despite having concluded its deal with CPC, traders said KPC will likely lower the term price to match the revised level.
"From my understanding, KPC will likely give CPC whatever the final price is," the second trader added.
Although naphtha sentiment is firmer now than a month ago, traders said buyers are cautious, as they would be locked into a 12Ümonth deal at a time of uncertain demand and supply dynamics. Crack spreads Ü premiums/losses from refining Brent crude into naphtha Ü was at $95.95 a ton premium on Friday versus an $80.10 premium a month ago, helped by Korean crackers running at fullÜtilt and robust Chinese petrochemicals demand. But traders also noted that KPC has been selling more spot cargoes lately and at slight premiums. Going forward, China will have more new crackers, which would lower its petrochemicals imports. If this happens, South Korea, Japan and Taiwan will be badly hit, as they rely on China to soak up their excess petrochemicals.
Additionally, new petrochemical supplies in the Middle East Ü which is targeting China Ü will affect the market share of Northeast Asian producers. KPC itself has just started a new aromatics complex this week after months of delays, and it has been reducing its term naphtha exports since last year to divert feedstocks to the plant. Due to this, KPC did not renew the DecemberÜNovember contracts with Marubeni and PetroÜDiamond, owned by Mitsubishi Corp. Taiwan''s Formosa Petrochemical, which did not renew the April 2008ÜMarch 2009 contract, was not in the current DecemberÜNovember talks.
Impact on ADNOC
ADNOC, Asia''s thirdÜlargest naphtha supplier, are in talks with buyers to close its term deals for JanuaryÜDecember 2010 supplies, and will be closely watching the standoff between KPC and its customers over prices. Offers for its three naphtha grades were quoted at $16.50 a ton premium for pentane plus, followed by $15.50 premium for lowÜsulphur and $14.50 premium for splitter grade. All prices are pegged to the refiner''s own price formula, on an FOB basis. CPC has already accepted ADNOC''s splitter grade at the offered price. "But given the revision in KPC''s price, ADNOC may follow that cue," said a trader involved in the ADNOC talks. ADNOC''s contract prices are usually one to two dollars a ton above KPC''s.
Selling fuel oil to Glencore
In other news, KPC sold by tender another 80,000 tons of fuel oil for midÜNovember loading, its second parcel for the month and adding to the more than one million tons from Middle East last month, traders said to Reuters on Friday. The cracked 380Ücentistoke (cst) fuel oil cargo, for lifting on Nov. 18Ü19 from Mina AlÜAhmadi, was awarded to Glencore at a premium of two to four US dollars a ton to Middle East spot quotes, on a freeÜonÜboard (FOB) basis. Glencore''s shipping arm, ST Shipping was also seen fixing a vessel, Stravanger Bay for Nov. 18 loading from Kuwait to East Asia, likely to be Singapore. KPC last offered a similar parcel for earlyÜNovember loading, but the result of this tender remained unknown. In October, spot Middle East exports, mainly from Saudi Arabia and Kuwait, totaled more than one million tons, with KPC exporting at least four fuel oil cargoes, totaling 320,000 tons into the international market.ÜAgencies
Last updated on Saturday 7/11/2009
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