UPDATE 3-Morgan S., Vitol to ship gas oil to Chile post-quake
* Morgan Stanley, Vitol to ship diesel from Korea to Chile
* Chile could draw on existing US distillate stocks first
* East-West arb not ideal, but ready supply on floaters (Adds comment from U.S. traders)
By Jennifer Tan and Luke Pachymuthu
SINGAPORE/DUBAI, March 1 (Reuters) - U.S. bank Morgan Stanley and European trader Vitol have each booked a vessel to ship gas oil to Chile from South Korea, as the country steps up diesel imports after a powerful earthquake damaged two refineries over the weekend, shipping brokers said.
Expectations of Chile's increased imports buoyed sentiment in the Asian gas oil market on Monday, sending cracks to nine-month highs. [ID:nSGE6200B5]
But traders said Chile was more likely to draw on existing diesel inventories in the United States before moving more Asian cargoes to the West, as the economics of the East-West arbitrage were less than ideal.
"Chile needs very prompt cargoes, and they will probably try USGC (U.S. Gulf Coast) first. But because of low refinery run rates in the U.S. and scheduled refinery turnarounds, they will eventually have to import the cargoes from Asia," said a distillates trader with an Asian refinery.
U.S. traders and shippers said that there had been a flurry of inquiries about shipping from the United States and Caribbean to Chile but by midday Monday no fixtures had been reported.
"I haven't seen anything done," said one Gulf Coast trader.
"But those who might be fixing are probably refiners who are diverting barrels from pipeline to water."
Freight rates for the region were steady, shippers said.
Asia will also start an active spring maintenance season from around March, but has ready supplies in floating storages across this region totaling around 14 million barrels last month, which can be quickly shipped to meet prompt demand in Chile. [ID:nSGE61A076]
The volume of refined products held on tankers worldwide had fallen to 85 million barrels in mid-February from 114 million barrels in December, Danish tanker operator Torm (TORM.CO) said last month. [ID:nSGE61A076]
Morgan Stanley has booked the vessel called "High Trader" to ship 40,000 tonnes of gas oil to Chile for March 12-14 loading from South Korea, while Vitol has provisionally booked the "Global Spirit" to carry 40,000 tonnes of gas oil for loading on March 12.
Chile's state energy company ENAP said it was boosting diesel imports, after two of its oil refineries -- Aconcagua and Bio Bio with combined capacity of 220,000 barrels per day -- were damaged by Saturday's 8.8-magnitude quake. Its general manager Rodrigo Azocar said the company had sufficient diesel stocks to last for 10 days. [ID:nN27176503] [ID:nCHILE]
TRADERS ON WATCH
But it was too early to tell how much more Chile would buy in the aftermath of the earthquake, traders said.
"It's unclear right now. We're all trying to assess the impact of the quake on imports," said another trader.
Chile typically imports between five and seven cargoes of gas oil per month from Japanese or South Korean suppliers such as S-Oil and GS Caltex, and one cargo per month from Russian trader LUKOIL under a term deal, traders said.
Diesel use in the energy-poor country soared to record levels last year when a severe drought hit electricity production and Argentina restricted natural gas exports, raising the spectre of power rationing.
At the height of the power crunch in 2008, Chile was importing 10 boatloads of diesel per month to meet the needs of its thermoelectric power plants.
Imports have since fallen by about 75 percent in the second half of last year, after a natural gas plant came on line and heavier rains made it possible to generate more hydro power.
But this time, metals analysts are also concerned about prolonged power outages at mines, which could cause a significant increase in liquid fuel demand to power generators.
Asian gas oil cracks surged to $9.46 a barrel in afternoon trade, up from $8.68 per barrel on Friday, their highest since June last year.
Gas oil's March EFS -- the price difference between benchmark Asia 0.5 percent sulphur grade and levels on London's Intercontinental Exchange -- was traded at $6 to $9 per barrel in the last two weeks, up from around $5 at the start of last month. [PS/A]
These economics dictate that traders either float Western cargoes eastwards, or keep vessels anchored in Asia to meet regional demand.
"East Asian prices are really strong, it will not be easy to move cargoes from Asia to Chile -- it's all a matter of economics," said a distillates trader with a European firm. <OILSWAP/SG> (Additional reporting by Ryan Siew; Janet McGurty in Toronto and Kristen Hays in Houston; Editing by Lisa Shumaker)