Indonesia crude prices hit year-highs on Japan demand: Report

Spot premiums for heavy, low sulphur Indonesian crudes have surged to highs not seen for at least a year as Japanese buyers snapped up cargoes to use for power generation, Reuters quoted traders as saying on Friday.

Traders said Japanese traders had been scouting the market for Indonesian barrels, which are suitable for direct burning in power plants.

Japan's largest utility, Tokyo Electric Power Co (TEPCO), is looking to boost thermal power generation after a scandal over maintenance checks at nuclear facilities closed several plants.

Minas crude, Indonesia's key export grade, traded on Thursday at a premium of about $2.00 a barrel over the official Indonesian Crude Price (ICP), traders said.

For September and October barrels, Minas fetched premiums of 50-90 cents over ICP, they said.

"I don't remember when I last saw Minas premiums hit as high as $2.00, it definitely wasn't in the last year," said one Asian crude trader.

Other heavy and sweet Indonesian crudes have also commanded strong prices for spot November cargoes.

Taiwan's state oil firm Chinese Petroleum Corp (CPC) awarded on Thursday a monthly tender to buy spot November Indonesian Duri crude at ICP plus about $1.30 a barrel, the highest premium awarded in the tender in the past two years, traders said.

In October, CPC paid ICP plus 75-80 cents for spot Duri.

Duri crude was offered in the Asian market on Friday at ICP plus $1.30 a barrel, while Cinta grade was talked at ICP plus $1.30-$1.50.

Traders attributed the strength of the Indonesian crude market solely to expectations of higher demand from TEPCO.

TEPCO has closed seven nuclear plants and will shut an eighth later this month. They have a combined capacity of 8,000 megawatts.

Last month, TEPCO restarted operations at one mothballed thermal plant and expects three others to come onstream by December.

Some traders, however, saw the rally in spot premiums coming to an end as Japanese buyers bought cargoes of Cinta, Minas, Vietnam's Ruby and Sudan Nile Blend crude in the last week.

"They have bought quite a bit of crude, so I think that should cover their immediate needs. Anyway, there is very little Indonesia crude left for November so how much higher can premiums go," said a trader.

Traders said it was too early to gauge if December cargoes would fetch similarly lofty premiums. (*)