Kuwait Petroleum Corp (KPC) has agreed to sell its 2016 term barrels for gasoil and jet fuel at 8-11 percent lower premiums, indicating a further weakening of the middle distillates market next year, traders said.
Gasoil term premiums were expected to firm given the company's initial quote was at least 20 per cent above the 2015 rate, they added.
KPC has agreed to finalise its 2016 term contract to sell 500ppm sulphur gasoil at a premium of $1.15 a barrel to Middle East quotes, down 8 per cent from $1.25 for 2015, they said.
For jet fuel, KPC has agreed a premium of $1.60 a barrel to Middle East quotes, down 11 per cent from 2015's $1.80, with at least one buyer, they added.
Both oil products contracts are to be finalised on a free-on-board (FOB) basis, one of the traders said.
"The premium sounds really low but if you look at 500ppm levels this year, it was not good at all," a Singapore-based trader said.
The lower premiums could have been driven by a drop in purchases by Indonesia and Vietnam, industry sources said.
Indonesia's Pertamina, one of KPC's long-term gasoil buyers, may be requesting for lower volumes next year in line with a domestic biodiesel mandate, an industry source said.
Indonesia is set to raise the minimum bio content in diesel fuel used for transport to 20 per cent in 2016, from 15 per cent this year.
Vietnam's Petrolimex and KPC ended their long-standing diesel term contract earlier this year, likely contributing to higher available volumes.
This comes at a time when supplies of middle distillates in the Middle East are expected to rise further next year as new refineries ramp up run rates, traders said.
Bahrain Petroleum Co (Bapco) and Abu Dhabi National Oil Co (Adnoc) are still negotiating to sell 2016 term diesel and jet fuel, traders said.
Bapco might have reduced the asking price for its 10ppm diesel term cargoes for next year to $3.75 a barrel above Middle East quotes and $2 a barrel premium for jet fuel, traders said.
Adnoc is seeking a premium of about $2.90-$3 a barrel to Middle East quotes for its 10ppm diesel term contract and a premium of $1.95-$2 a barrel for jet fuel, one of the traders said.