Indian Oil sells Dec fuel oil; volumes highest in 5 yrs

SINGAPORE  (Reuters) - Indian Oil Corp. (IOC) sold almost four times its monthly average volume of fuel oil for December-loading, boosting availability at a time when Western arbitrage supplies were tight, traders said on Monday.

The state-owned refiner exported at least 205,000 tonnes, its highest in a single month in more than five years, due to low domestic demand and expanded capacity at its Panipat plant.

January volumes are expected to stay high, with fundamentals remaining the same as they were for this month, traders said.

"Domestic demand from the region has fallen because end-users, mostly power plants, have switched from using fuel oil to natural gas, which is a much cheaper option these days, with oil prices at above $90.00," an India-based trader said.

"Also, price levels in Singapore are attractive, due to the supply tightness there and IOC also has increased volumes to sell, due to the expanded capacity at its Panipat refinery."

IOC has exported a total of 660,000 tonnes this year, or a monthly average of 55,000 tonnes, with most of the volumes coming in November and December, Reuters data show.

The refiner sold 120,000 tonnes for November-loading, the same month when its Panipat facility started operating at an increased capacity of 300,000 barrels-per-day (bpd) after its crude unit was upgraded. The volume of exports increased the most from its Haldia plant, where it had sold three to four 180-centistoke (cst) cargoes of 15,000 tonnes each.

Before November, IOC did not regularly export fuel oil from Haldia, selling only two 15,000-tonne parcels since the start of the year.

"The excess Panipat barrels probably displaced domestic requirements from Haldia, hence the higher-than-usual volume of exports from the region," another trader said.

IOC also exported more volumes from its Chennai refinery for the month, raising them to three 30,000-tonne lots for December from the usual two, and also sold two from Mumbai for the first time this year.

Despite its increased exports, IOC remains a distant third in terms of export volumes, behind Essar Oil, which sold about 2.4 million tonnes, and Mangalore Refinery & Petrochemicals Ltd. (MRPL), with 1.4 million tonnes.

The increased IOC volumes helped improve a tight Singapore market, which has seen low Western arbitrage volumes for three straight months till January.

Volumes for each month between November and January averaged around 3.1 million tonnes, down from the year's monthly average of 3.4 million tonnes.