Most buyers however, said they were unlikely to raise their bids given the weakness of the middle distillates markets and the uncertain outlook still for Asia's oil markets next year.
Saudi Aramco's term middle distillates tender, issued last month, is the largest in the Middle East. It closed on October 16 and bids are valid until November 30.
Saudi Arabia committed nearly two million tonnes of gas oil in 1998 term contracts, traders estimated. In private negotiations with a shortlisted 17 potential buyers in Bahrain last week, traders said Aramco's selling ideas were as follows:
Jet fuel from Yanbu and Rabigh at MidEast quotes +30cents"That's definitely too high," one trader with a US oil company said, referring to the offer price for 0.25-per cent gas oil, the most keenly sought after grade.
India, a key buyer of Middle East gas oil, was expected to shift imports to the lower sulphur grade from 0.5-per cent, starting April next year.
"They are sellers, so they are asking but whether they get it or not is another story," the trader said. The trader was among some 17 oil companies including Cargill, Veba Oil, Galaxy, Enron, BB Energy, Elf, Total, British Petroleum and Shell, who were involved in the Bahrain talks.
Traders said that bids varied but several buyers were willing to pay around 30 centspremium for 0.5-per cent gas oil from Jubail compared with the asking price of +45 cents.
They would only pay 50-55 cents premium for the 0.25-per cent grade from Jubail. "You can buy out of Korea and Thailand. You can buy 0.5-per cent and get close to 0.2-per cent most of the time, and if you want a guarantee, it probably cost you 10-15 cents," one trader said.
Traders said gas oil cargoes from Yanbu and Rabigh were generally bid 15 cents lower than Jubail, at the outer limits of Saudi Aramco's price ideas, while jet fuel cargoes were bid at 10-15 cents, at least half of Saudi's idea, they said.
No deals were concluded in Bahrain and traders now expected Aramco to bide their time in the tender which is valid until November 30.
"They will stretch it to the end and I won't be surprised if they might come back for, you know, one further little prod to see whether they can get more money," one trader said.
"It's a little bit more bearish on the jet fuel side but gas oil, they should be happy withthat," the trader said. Many traders said they were unlikely to raise their bids.
Traders also said that Aramco's award volumes would also be less next year, amid the lower bids. "I got a feeling that they won't award that many contracts," one trader with a European-based oil company said. "Last year they overcommitted and had no flexibility to cut back output."
Traders said that after committing nearly two million tonnes this year, Saudi Arabia had no spot sales for the second half of the year.
The lower volume award would also be in line with reluctance on the part of buyers to take on term commitments next year, in the face of still uncertain Asian oil demand.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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