Qatar International Petroleum Marketing Co, or Tasweeq, will stop term gasoil exports from next year as domestic demand is expected to increase, industry sources based in the Middle East and Singapore said.
The absence of Tasweeq as a regular supplier of high sulphur gasoil in the Middle East is expected to strain the market as demand remains steady while supply is drying up with more refineries switching to cleaner fuel.
Tasweeq exports about 30,000 to 60,000 tonnes of 0.2 percent sulphur gasoil every month through its monthly term contract and offers similar volumes in the spot market occasionally, traders said.
The company will stop term exports from next year as domestic demand in Qatar, an OPEC member in the Gulf region, has been steadily increasing, a source close to the matter said.
"Qatar's appetite for diesel has been growing and the country needs more fuel," the source said.
But the country has no plans as of now to switch to cleaner fuels, the source added.
Qatar is one of the world's fastest growing economies with increasing demand for fuels such as diesel used for industrial use and transport.
Tasweeq is a state-owned company that is responsible for the marketing of refined products for Qatar Petroleum and all RasGas and Qatargas ventures, according to the company website.
State-owned Abu Dhabi National Oil Co (ADNOC) is another company that will not be exporting the 0.5 percent sulphur gasoil to its term buyers and will instead be switching to either 500 ppm or 10 ppm sulphur gasoil from next year, Reuters reported last month.
"This will definitely have an impact on the market and you can see prices already going up for these grades," said a Singapore-based trader familiar with the Middle East market.
"The premiums for the 0.5 percent and 0.25 percent will likely go up even further next year as there is less and less supply for these grades, but demand is still there."
Cash differentials for the 0.5 percent and 0.25 percent sulphur gasoil have been mainly hovering around $1.50-$1.80 a barrel and above $2 a barrel to Middle East quotes respectively recently, compared with a discount of about 35 cents a barrel to a slight premium during the same period just a year ago.
REFINERIES MOVING TO PRODUCE CLEANER FUELS
Refineries in the Middle East are competing to upgrade facilities that convert the heavier high sulphur gasoil to more expensive and cleaner fuel. Only a few produce and market a limited amount of the higher sulphur grades containing 5,000 parts per million sulphur and 2,000 ppm sulphur gasoil.
Kuwait Petroleum Corp produces 0.2 percent sulphur gas oil for export, but offers the product mainly to its term buyers. Spot sales from the company are not regular, traders said.
India's Mangalore Refinery & Petrochemicals Ltd (MRPL), Malaysia's Petronas and Saudi Aramco's joint venture refineries in Jubail and Yanbu produce and export 0.5 percent sulphur gas oil for the Middle East and South Asian markets.
But spot exports from these refineries have been sporadic, with one to two cargoes of 40,000 tonnes each sold through tenders every month, traders said.
The majority of the diesel output in the Middle East is still 500 ppm sulphur gas oil to cater to the domestic market. Some refineries are now even moving towards producing 10 ppm sulphur diesel.
Countries such as Jordan, Yemen, Egypt, Somalia, Sri Lanka, Bangladesh and Pakistan are regular buyers of the high sulphur gasoil grades in the region.