OPEC giant Saudi Arabia has increased diesel imports to cope with the anticipated rise in demand during the summer season and cope with localized distribution issues that have caused shortages in the capital Riyadh and other parts of the country, trading sources and media reports said Wednesday.
One trading source familiar with gasoil/diesel movements into Saudi Arabia said that the increase in import volumes began in May and that the kingdom was expected to import six additional MR-sized cargoes (approximately 35,000 mt each) for June.
The source estimated that Saudi Arabia imported around eight MR cargoes into Jizan and five into Jeddah per month in the first quarter of the year.
Saudi-owned Al-Arabiya television reported Tuesday that there was a severe shortage of diesel in Riyadh and it showed footage of dozens of trucks waiting at filling stations. It said in a report posted on its website that up to 1 million trucks were affected by new regulations prohibiting trucks from the capital's roads during daylight hours, which had caused bottlenecks.
The al-Arabiya report said up to 1 million trucks were affected by the shortage.
Demand for diesel-fired power generators rises during the summer months to cope with higher demand for air-conditioning. While diesel generation is a relatively small sector of the Saudi power market, sources have said that even a small hike in demand from generators can lead to competition for supply between the power generation and transport sectors.
A Saudi source cited logistical bottlenecks and distribution problems for the recent localized shortages, but said there was no overall shortage of diesel in Saudi Arabia, the world's biggest oil exporting nation.
This view was supported by one supplier of term barrels into Saudi Arabia who noted that, while term buying into the kingdom typically increases going into the summer period, there was nothing out of the ordinary so far.
A Singapore-based distillate trader also said the current buying pattern was nothing exceptional, but added it would not be a surprise if Saudi Arabia imports additional barrels of diesel -- especially as the recent reported shortages could cause panic buying or lead to hoarding and magnify any problems caused by the logistical issues.
Saudi Arabia is also expected to start stocking up on diesel ahead of the Muslim fasting month of Ramadan starting July 20, which will see a rise in diesel consumption across the Middle East, the trading sources said.
AG premiums for 500 ppm gasoil have consolidated at around $4.00/barrel over the 0.5% sulfur benchmark, but have been relatively stable in the last few weeks.
The Saudi Gazette newspaper also reported the diesel shortages in Riyadh, saying that diesel-fired trucks were having to wait hours to fill up along highways leading in and out of the capital.
The newspaper quoted Saudi Aramco in a statement Friday as denying there was a diesel shortage in Riyadh. It quoted the company as saying that there was an abundant supply of diesel and that market supply was determined by ongoing studies and annual plans based on customers' and distributors' basic and urgent needs.
The Saudi Gazette also reported that Saudi Customs officers had seized 10 diesel trucks with Jordanian license plates trying to smuggle product out of Riyadh.
Saudi retail fuel prices are heavily subsidized by the government and diesel sells for Saudi Riyal 0.25/liter (around 7 cents).
