Middle East fuel oil supplies into East Asia for August are expected to fall drastically from high levels of the past two months amid easing demand from China, traders said.

So far, only 400,000-450,000 tonnes of cargoes from Saudi Arabia, Iran and Kuwait have been fixed for August arrival, down from more than 1 million tonnes for each of the last six months, Reuters data show.

The tighter inflows were primarily due to less supplies from Iran, which had curtailed spot offers for July- and August-loading barrels due to disruptions to its domestic natural gas supplies.

'The lack of Iranian cargoes have also affected the Middle East players, who then need to find replacement barrels from other suppliers in the region and that has resulted in less cargoes coming East,' a Singapore-based Western trader said.

'We can't compete for the cargoes if the Middle East-based guys want it because of the freight advantage that they have, and so far, they have taken almost all the sell tenders.'     

Reflecting this, four of the last six offerings from Saudi Arabia have been awarded to Middle East players. The latest was ExxonMobil's regular high-viscosity offering from Yanbu -- the 90,000-tonne lot, for Aug 4-6 loading from the joint-venture Samref refinery, was sold to Bakri at a discount of $24.00-$25.00 a tonne to Singapore spot quotes on a free-on-board (FOB) basis.

Saudi Aramco also sold three rare low-viscosity, low-density parcels of 90,000 tonnes each, all for lifting between second-half July and early August from Rabigh, to players with operations in the Middle East.      

Supplies from Kuwait have also been at below average volumes since June-arrival, with no more than a single 80,000-tonne parcel seen for each of the past two months, while no fixture has been seen for August-arrival as yet.

The lower volumes are mainly due to Kuwait Petroleum Co (KPC) diverting some of its already-limited spot supplies to Pakistan, where demand has been very strong.

More supplies are expected from the region, mainly from Saudi Arabia, which is expected to offer at least another five August-loading cargoes, totalling 450,000-500,000 tonnes, in line with its average monthly supply volumes of 500,000-600,000 tonnes, traders said.

The uncertainty is how much of these volumes will flow into East Asia, with the Middle East market progressively strengthening, supported by strong demand from Pakistan and the Fujairah marine fuels market in the United Arab Emirates. - Reuters