Iran, a regular exporter of fuel oil, will halt spot exports in first-quarter 2009, as it looks to meet domestic demand for power generation during winter, giving more support to a recovering Asian market, industry sources said on Thursday.

The National Iranian Oil Company (NIOC), which typically exports around three to four fuel oil cargoes monthly between January and March, will offer spot cargoes only if domestic requirements ease.

"We cannot offer spot cargoes because we have to manage our requirements for power generation in Iran during the winter," a source familiar with the fuel oil export programme said.

"We will continue to meet our agreements on our term contracts, and will only consider spot sales if the winter is not severe and the requirement for domestic power generation is less."

The premium for the 280-centistoke (cst) cargoes from Iran are forecast to jump by as much as $4 a tonne to $20 a tonne, on a cost-and-freight South China basis, up from current levels of about $16 a tonne, traders said.

Last winter, Iran was forced to cut back their fuel oil exports as the country suffered one of its worst winters, amid disruptions to its natural gas supply, forcing it to burn the residual fuel at power plants throughout the country.

Stockpiles from the Middle East will also decline. Saudi Aramco, the world's top oil exporter, plans to halt exports of term fuel oil in the first quarter of 2009 as it retains supply to meet growing requirements from domestic utilities, traders said.

Both Iran and Saudi Arabia have recently joined Kuwait in burning growing volumes of fuel oil for power generation and water desalination as domestic gas supplies tighten, consulting firm PFC Energy said.

Fuel oil from Iran is typically purchased as a refinery feedstock in China, while in the Middle East it is bought for its low-density specifications and used as a blending component.

Fuel oil imports into China rose 1.17 million tonnes in November, up from 875,000 tonnes in October. Small and mid-sized refineries in China were operating at around 22 percent of capacity in early December, up from 12-15 percent in late November.-Reuters