Saudi diesel exports to Singapore soar in Jan.

SINGAPORE —  Saudi Arabia is shipping more than usual volumes of diesel to Singapore, dragging down cash premiums for the fuel to nearly a one-year low, and flooding an already oversupplied market. The world’s biggest oil exporter shipped 400,000 to 700,000 tons of diesel to Singapore in January and is expected to export around 400,000 tons in February, two sources familiar with the matter said. The higher than usual volumes would likely continue at least until March, which is expected to put further pressure on diesel differentials, one said. Saudi Arabia shipped 431,819 tons of diesel in January, compared with 206,747 tons in December and 118,140 tons in November, according to data from Singapore trade agency International Enterprise. The Singapore trade data does not reflect all volumes shipped in to the city-state, traders said. As a result, the cash premium for diesel with 10 parts-per-million (ppm) sulfur, the fuel being shipped by Saudi Arabian refineries, fell to a nearly one year low in January and is languishing near that level, Reuters data showed. Saudi Arabia, which turned net diesel exporter in 2014, spurred by increased supply from new refining capacity, has been shipping its excess diesel mainly to Europe and Africa as freight rates are usually cheaper than to Asia, traders said. But a glut of diesel in Europe where storage levels of the fuel in the Amsterdam-Rotterdam-Antwerp (ARA) hub are near record highs is driving volumes east instead, they added. Diesel prices are higher in Singapore than in Europe boosting the flows, said a middle distillates trader. Diesel is also being shipped from Europe to New York in a sign that Europe has more cargoes than it can absorb, he added. East African demand has also reduced significantly over the past few months, which is also driving more Indian barrels to Singapore instead of Africa or Europe, traders added. Kenya, for example, has sought nearly 40 percent less diesel for March than it required in January through its monthly spot tenders, as it grapples with weak demand and high inventories, a source familiar with the local market said. Diesel cargoes from Saudi Arabia’s 400,000 barrel per day (bpd) joint venture Yasref refinery is also not able to meet the more stringent European winter specifications, a Singapore-based trader said. “It’s a combination of specifications issues and demand in the West being bad with floating storage still around,” a second trader said. “This is why the (cash differential) for 10ppm sulfur diesel is very weak in the Singapore market.” — Reuters