* Large volumes of physical cargoes and derivatives
* Saudi Arabia may be main outlet as demand rises for summer
* East Africa, Iraq demand also supports
By Jessica Jaganathan
SINGAPORE, April 22 (Reuters) - Oil major BP and top oil trader Vitol have snapped up at least 7.2 million barrels of gasoil in Singapore in April, despite weak Asian demand, in bullish trading by the companies, industry sources said on Monday.
These are some of the largest purchases of physical barrels in the Singapore trading period in recent years, the sources said.
The two companies have also bought at least 6.6 million barrels of gasoil derivatives in April, the sources added.
Asian gasoil demand has been lacklustre as a weaker economic climate has prompted key consumers like Indonesia and Vietnam to stay away from the spot market, pushing down margins to their lowest in nearly a year.
“I think it’s more a paper game with some firm outlets they might have and playing into those,” a Gulf-based trader said.
At least five long-range sized vessels have been provisionally fixed by Vitol and BP to carry gasoil from Singapore to the Red Sea, traders and shipbrokers said.
A dip in Singapore differentials due to the weak regional demand has made it economic to ship cargoes from the Southeast Asian country to the Red Sea, industry sources said.
Saudi Arabia’s gasoil demand typically starts increasing from April due to summer demand for the power generation fuel when temperatures in the Gulf soar, boosting electricity demand for air conditioning.
The country is set to import about 7 million barrels of gasoil in April, an increase of about 40 percent from previous months, a source familiar with the market said.
“Saudi Arabia is the only stable outlet right now as there is no outlet in Asia. So for bull game, they might be selling the cargoes to the Saudis in May,” the source added.
Spokesman for BP and Vital could not immediately be reached for comment.
Vitol and BP are also likely meeting demand from East African countries and from Iraq, traders added.
“The demand for gasoil in East Africa is not as bad as in Europe or Asia as they have a basic requirement for mining,” a North Asian trader said.
“BP seems to have a lot of east-west length,” the source added referring to a derivative that traders use to hedge movement of their physical cargoes from Asia to outside the region.
East African countries Tanzania and Kenya have been buying about 3 million barrels of gasoil in the spot market every month while Vitol has a term contract with Iraq’s State Oil Marketing Organisation (SOMO) to supply about 8.2 million barrels this year.
BP has covered most of its 10 ppm sulphur diesel requirements for May, earlier than usual, signalling its demand from Australia could also be up, the source added.
U.S. distillate stockpiles, which include heating oil and diesel, rose 2.36 million barrels in the week to April 12, compared with forecasts for a draw of 500,000 barrels, data from the U.S. Energy Information Administration showed.
The high inventory has made arbitrage from the U.S. to Europe profitable with several companies eyeing movement of diesel cargoes on that route, industry sources said.
The large number of purchases will likely draw down inventory in Singapore, which in turn could boost demand in Asia, the sources added.
“In fact, some of the vessels have failed as Singapore is getting dried up of 500 ppm sulphur gasoil,” the first shipping source added.
Vitol: 2.25 million barrels of 500ppm sulphur gasoil
BP: 4.65 million barrels of 500 ppm sulphur gasoil
BP: 300,000 barrels of 10 ppm sulphur diesel