The carrying capacity of oil tankers that docked at Ras Tanura, Saudi Arabia's biggest crude-loading port, gained 22 percent in the latest week, according to ship- tracking data compiled by Bloomberg. Vessels with a combined capacity of 10.1 million deadweight tons arrived at the facility in the week ended Jan. 28, compared with 8.29 million a week earlier. The ships would be able to haul about 74 million barrels of crude in total, assuming a conversion factor of 7.33 barrels a ton. Japan will be the largest recipient, followed by China and Singapore. Arab Heavy, the Kingdom's cheapest oil, will be sold to Asian customers in March for $2.02 a barrel less than higher-quality Arab Light, the smallest difference since April 2010, according to a Bloomberg survey of 10 buyers in Japan, Singapore, China, South Korea and India. Aramco will announce official selling prices, which act as benchmarks for pricing in Iran, Iraq and Kuwait, on Feb. 5. The return on making fuel oil, used as "bunker" to power ships and for producing electricity, rose 70 percent in January, according to data from PVM Oil Associates Ltd. Supplies from Russia and Sudan are waning even as consumption rises in China and Japan, lifting bunker prices by 30 percent from a year ago. "Bunker-price hikes will surely justify the hike of Arab Medium and Arab Heavy," said Osamu Fujisawa, an oil economist in Tokyo who worked for Saudi Arabian Oil Co. and Royal Dutch Shell Plc in a career spanning 43 years. While Aramco is expected to cut the so-called differentials for all of its export grades to Asia, the drop for the heavier grades will be smaller than that for lighter grades, according to the 10 survey respondents. They declined to be identified, citing company policy. Aramco will cut its so-called price differential for Arab Heavy sold in March by 17 cents a barrel, according to the survey. That means the grade would cost 62 cents a barrel less than the average of the Oman and Dubai regional benchmarks, which traded today at $110.68, up 4.7 percent this year. Arab Light will fall by 65 cents to $1.40 a barrel, according to the survey. That would put the price gap between them at $2.02, the lowest spread since March 2010. A narrowing backwardation, a market situation where the price for delivery now is greater than for shipments later, is another reason for Aramco's expected reductions, the survey said. Dubai swaps for February cost an average 88 cents a barrel more than April during trading in January, according to PVM data.
