India's Tata Power seeks 130,000 T LSFO in rare term tender

Indian utility Tata Power has issued a rare term tender seeking up to about 130,000 tonnes of mostly low-sulphur (LSFO) fuel oil in up to five deliveries starting next month, traders said on Thursday.

The tender, which follows another rare term requirement by Taiwan's CPC for more than 700,000 tonnes, is expected to keep sentiment for LSFO bullish, holding premiums for 0.3-percent sulphur lots at strong levels of around $100.00 a tonne to Singapore spot quotes.

The tender closes on Dec. 19 and is valid until Dec. 23. It is for the delivery of up to five 25,000-tonne lots of 0.3 percent sulphur and 1,200-tonne parcels of high-sulphur between January and September to Mumbai on a cost-and-freight (C&F) basis.

"The LSFO market has been strong since July, stemming from post-Fukushima Japan, and exacerbated by Taiwan needing more than their usual volumes as well," a Singapore-based Asian trader said.

"Tata's requirement, though not at larger volumes than they usually take in a year, will further fan the bullish sentiment as they have departed from their usual practice of buying spot. This signals that they may see the market strengthening and want to lock in lower premiums."

The first parcel is slated for delivery on Jan. 21-30, with deliveries for the remaining cargoes to be declared 40 days before the delivery dates.

Tata typically buys 4-6 cargoes of 25,000-30,000 tonnes each annually from Singapore-based sellers.

Sentiment in the LSFO market has been bullish since July, driven by strong demand from Japan in the wake of the March earthquake that crippled much of its power-generation capacity, due to damage to its nuclear plants.

Its ravenous demand went beyond the country's peak summer period, with weekly import LSFO volumes averaging about 115,000 tonnes since July, the highest week-average levels since 2006 and up from last year's average of about 32,000 tonnes, official data show.

Sentiment was further boosted by CPC's rare term tender for nine 80,000-tonne cargoes for delivery between April and December next year, which closed on Tuesday and will remain valid till Friday.

The Taiwanese refiner is also seeking 40,000 tonnes of LSFO, for Feb. 1-29 delivery, via a spot tender that also includes 40,000 tonnes of HSFO, which closes next Tuesday.

Premiums are also boosted by the global reduction of sulphur levels for marine fuels to 3.5 percent from Jan. 1, down from 4.0 percent now, by the International Maritime Organisation (IMO).