Saudi Arabia sold its third August-loading fuel oil cargo to East Asia at lower prices on the back of two unexpected deals that were concluded at high price levels in a tightly-supplied market, traders said yesterday.

 Saudi Aramco sold the high 700-cst viscosity parcel of up to 90,000 tons for Aug 22-24 loading from the joint-venture Samref refinery in Yanbu to US-based trader Cargill at a discount of about $22.00-$23.00 a ton to Singapore spot quotes on a free-on-board (FOB) basis, down from around minus $20.00 previously, traders said.

That the consecutive parcel is also heading east at lower price levels would suggest that the Middle East may not be quite as tight as initially expected,’ a Singapore-based Western trader said. ‘The transaction price is still quite high, and the landed cost in Singapore isn’t that low, unless, of course, they have cheap cutters.

Let’s wait and see if more comes here, but we’re done for August and are looking at September arrivals now. Two previous deals for Saudi cargoes were done at high price-levels.

Glencore bought a similar cargo, for Aug. 15-17 loading, from ExxonMobil at a discount of about $20.00 a ton to Singapore spot quotes, FOB, up from minus $24.00-$25.00 previously.

Aramco sold another parcel, 95,000 tons of A961 180-cst for Aug. 5-7 lifting from Ras Tanura, to France’s Totsa at a premium of $3.00-$4.00 a ton to spot quotes, FOB, up from $2.00-$3.00 previously.

Prior to the two deals, the last four offerings from Saudi Arabia, including three parcels of low-viscosity, low-density fuel oil offered for the first time due to an outage at Aramco’s Rabigh facility, were sold to players with Middle East options.

 Both the East Asian and Middle East markets have been tight due to lower export volumes from Iran following disruptions to its domestic natural gas supplies. August Iranian arrivals are expected to be less than 200,000 tons for the month, down from this year’s monthly average of 550,000-600,000 tons and June’s all-time high volumes of about 1.2 million tons.

 This has also resulted in tighter August-arrival volumes of Middle East fuel oil into East Asia, totaling 500,000-550,000 tons so far, its lowest in nine months and down from above 1 million tons for each of the last six months.

Adding to the market’s tightness, Western arbitrage inflows for next month are at below-average levels, totaling 2.9-3.0 million tons, for a third straight month.

 However, the market’s upside is limited by poor demand from China, expected for the entire third quarter, due to poor refining margins by its small, private refiners who mainly use straight-run fuel oil as feedstock.

Traders expect a low-supply, low-demand month, with the market staying in moderate backwardation, reflected by current prompt levels of around $3.00 a ton for the August/September timespread contract.