Bahrain Petroleum Co (Bapco) has finalised its 2014 jet fuel and gasoil term contracts with several companies, with premiums set at lower levels than this year's, industry sources said on Monday.

Term premiums were set lower as buyers expected reduced import demand from Saudi Arabia and more supply from the Middle East next year due to new refining capacity and expansion of existing plants, the sources said.

Bapco's negotiation, one of the first to be finalised for next year, is expected to set the tone for term negotiations by other refiners in the Middle East.

Bapco set the gasoil term prices for 2014 at a premium of $2.50 a barrel above Middle East quotes and the jet fuel term prices at a premium of $2.15 a barrel, sources involved in the discussions said.

This is higher than the term prices for 2013, which were set at $2.25 a barrel for jet fuel. For gasoil, Bapco had set the 2013 term premium at $3 a barrel for the first quarter of the year, and $2.60 a barrel for the rest of the year.

"Generally, the (price) levels still seem a bit high for next year, given that we are expecting more capacity in the Middle East," a Gulf-based trader said.

Companies involved in the gasoil term negotiations included Vitol, Independent Petroleum Group (IPG), Gulf Energy, Gulf Petrochem, Glencore, Augusta Energy, Addax, Galana Petroleum, Emirates National Oil Company (ENOC), Swiss Singapore, Phillips 66, Itochu and Mitsui, traders said.

Among the buyers, Glencore and Mitsui are likely to be entering contracts with Bapco for the first time, traders said, though this could not immediately be confirmed.

These firms are probably trying to expand their trading business in the Middle East and expand their sales in Africa, where they are taking advantage of growth opportunities, industry sources said.

For jet, those involved in the talks included Royal Dutch Shell, BP, BB Energy, Vitol, IPG, Total, Glencore, Augusta Energy, Swiss Singapore, Galana, Addax and ENOC, traders said.

Buyer details could not immediately be confirmed with all the relevant companies.

Bapco may have reduced its overall supply volumes for gasoil, one of the sources said, though this could not be confirmed.

Saudi Aramco Total Refining and Petrochemical Company (SATORP), a 400,000 barrel-per-day (bpd) joint venture refinery by France's Total and Saudi Aramco started operations late this year and is expected to meet increasing diesel and gasoline demand in Saudi Arabia.

Traders said they were watching to see whether Saudi Aramco would be needing to secure any term volumes for next year or would reduce its requirements.

If the company is absent from the term market, excess Middle East diesel supply may struggle to find buyers, they added.

But others said growing demand from Africa, especially countries such as Iraq, Kenya and Tanzania, should absorb most of the exports from the Gulf.

African diesel imports are running at about 673,000 bpd and could grow to 766,000 bpd by 2015, according to analysts' estimates. – Reuters