The New Trading Arm of State Run Saudi Aramco Has Finalized a January to June 2013 Term

Reuters reported that the new trading arm of state run Saudi Aramco has finalized a January to June 2013 term contract to sell jet fuel with at least one buyer.

Traders said that Saudi Aramco Products Trading Company has agreed to sell undisclosed volumes of the fuel at a premium of about USD 2.70 a barrel above Middle East quotes for the cargoes, to be loaded from Jubail. That is nearly 30 per cent higher than its current term contracts.

They said that Royal Dutch Shell is the likely buyer, although this could not immediately be confirmed.

Traders said that Aramco is still negotiating the sale of term cargoes to be loaded from the Red Sea port of Rabigh and may finalize these by year end.

The company was offering either 45,000 tonne or 65,000 tonne cargo lots for loading from Jubail and Rabigh, with a half yearly term instead of its usual yearly term.

Traders were surprised at the premium finalized for Saudi's jet fuel term, which they said was too high at 15% to 20% more than those agreed by other Middle Eastern refiners.

A middle distillates trader based in Singapore said that "Wow, why would anyone pay so much to Aramco? Those levels are crazy."

Abu Dhabi National Oil Company finalized its 2013 jet fuel term premium at USD 2.35 a barrel above Middle East quotes, while Kuwait Petroleum Corporation and Bahrain Petroleum Company both settled theirs at USD 2.25 a barrel.

A second trader said that premiums might be higher for Aramco's term as its Jubail port is able to receive larger vessels such as Suezmax tankers, which would allow traders to optimize their cargoes.

The trader added that "Shell owns Jubail as well, so together with their equity barrels and Saudi term, they can move Suezmax out of Jubail."

The 305,000 barrels per day Saudi Aramco Shell Refinery company refinery in Jubail is 50 to 50 owned by Saudi Aramco and Shell Saudi Arabia Refining.

Traders expect the Middle East market to be flooded with supply of oil products when the new Saudi Aramco Total Refinery and Petrochemicals Company starts production at its 400,000 barrel per day plant at Jubail next year.

A Gulf based trader that but the refinery's gasoil yield will probably be more than jet fuel, meaning supply of jet fuel is unlikely to increase too much, which could also be supporting term levels.

Meanwhile, Aramco has finalized with at least 4 to 5 companies its gasoil term for next year. Sellers include Shell and Vito.