The National Iranian Oil Co. (NIOC) has told its Asian buyers that September-loading cargoes, straight-run 280-centistoke (cst) parcels from Bandar Mahshahr, will be limited to two to three 80,000-ton lots for its term customers, similar to August-loading volumes and down by about half from its average monthly exports.

“Avails will be the same as for August-loading, meaning the market will probably remain tight from now through September at least,” a Singapore-based Asian trader said.

“I don’t see a lot of Western arbitrage cargoes coming next month as well, with the Rotterdam barge market as strong and steeply backwardated as it is.” 

Reflecting the firm market, fuel oil’s prompt August/September timespread has held at a backwardation of $3.50-$4.50 a ton since the start of the month, and was valued at $3.75 midday Thursday.

Regular buyers said they were uncertain if the cut in exports will last beyond September, as NIOC has not given any indication.

“The story keeps changing. Last month, some sources said it would back to normal for September, while others said it would last till next year, after their peak winter demand period,” another trader said.

“No one knows what the real problem is either, beyond that they are keeping the cargoes at home due to disruptions to their natural gas supply.”

Iranian arrivals into East Asia, which had been heavy up till last month, has kept what could have been an intensely-tight market balanced in terms of both quantity and quality over the past three months. 

In June, record-high volumes from the country, totalling more than 1 million tons, landed in Singapore, while another 600,000-650,000 tons arrived last month. The monthly average has been 550,000-600,000 tons, up from 300,000-350,000 tons last year.

Most of the Iranian volumes were also better-than-specification 380-cst, supporting the market’s quality balance, in an environment where traders typically import raw high-viscosity, high-density parcels and blend them to specification, mainly into 380-cst for Singapore’s marine fuels market, the world’s largest.

The cargoes have been arriving into East Asia on board Very Large Crude Carriers (VLCCs) since the third quarter of last year, as combinations of the straight-run grade and low-density, low-water 380-cst from NIOC’s Bandar Abbas refinery. 

While volumes from Bandar Abbas are unaffected by the natural gas supply disruption, the lack of straight-run cargoes meant there are insufficient supplies overall to fill a VLCC.

The shortage has also impacted on the Fujairah marine fuels market, which currently lacks on-specification 380-cst, forcing players to pay high premiums for ready-made cargoes.

An Indian semi-term tender, for four cargoes over the August-November period, was awarded to an unusual Middle East player, Gulf Petrochem, at higher prices and opened a rare arbitrage from east coast India to the United Arab Emirates.

It has also increased the competition between Singapore-based players and their Middle East counterparts, who have freight advantage over cargoes that originate from the region, reducing inflows into East Asia. 

August inflows from the Middle East are at 600,000-650,000 tons, down by about 50 percent from a month ago, while Indian arrivals are about 25 percent lower at 200,000-250,000 tons, Reuters data show.

Squeezing the market further, Western arbitrage cargoes for September-arrival are expected to stay at below-average levels for a fourth consecutive month, with about 2.1-2.2 million tons booked so far.

The West-to-East arbitrage window for European cargoes has been notionally-closed for over two weeks, amid a steeply backwardated Rotterdam barge market that has seen its prompt timespreads hit consecutive three-year high levels.