The Asian gas oil market was stung on Monday by news that India had cancelled the bulk of its six-month and one-year term tenders, traders said.
They said the scene was set again for another week of uncertain trading after expectations that India would award the tender.
However, some traders said they were not too surprised at the result given that India has previously failed to award tenders.
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The market is upset but not too unduly to cause a big swing in prices. We expect IOC (Indian Oil Corporation) to issue (a tender) again. They have just pushed everything back a month with this news, a trader said.
The news cut 40 cents off gas oil swaps early on Monday amid wide bids and offers.
Traders said the market was expected to be under pressure for the better part of the week but could rebound quickly if the IOC re-issues a tender immediately.
IOC had issued tenders to buy 40,000-45,000 tonne cargoes and 87,000 tonne cargoes of 1.0-per cent sulphur diesel and 40,000-45,000 tonne of 0.25 per cent sulphur gas oil for delivery to the east and west coast in the second half of 1998.
IOC was expected to award three to five 40-45,000 tonne cargoes of 1.0 per cent sulphur diesel for the second half of 1998, one 87,000 tonne 1.0-per cent sulphur diesel cargo over the same period and three 0.25 per cent sulphur cargoes per month for June to May 1999. Instead, the IOC awarded only one 1.0-per cent sulphur gas oil cargo, which, traders said, was because it was offered aggressively at $1.72 per barrel over spot Middle East quotes on a cost and freight basis to the Indian east coast.
Aside from the bearish IOC news, traders said they expected China to slowdown its recent large purchases of gas oil, as the quotas were now almost fulfilled.
Chinese sources said last week that 1.8 million tonne of import licences had been allowed even after an import ban went into affect in February. Traders said China could extend its buying to early May arrival cargoes before taking a break.