DUBAI: Middle East gas oil premiums have risen about 80 percent from levels seen the previous month on growing requirements for power generation fuels in East Africa and regional summer demand, industry sources said on Monday. Benchmark diesel with a maximum sulphur content of 0.5 percent was pegged at a premium against Middle East benchmarks of about $2 for August, versus $1.20 from a month ago, traders said. Currently the level is definitely stronger, mostly because of demand coming in from places like East Africa because of their power demand, said a Singapore-based middle distillates trader familiar with trade flows in the region. Not only do you see the usual summer demand in play, but in places like East Africa where power demand is tight, there is almost a desperate need for alternative fuels which can be burned like diesel and fuel oil. According to data from the International Energy Agency, demand for oil in Africa has remained healthy at 3.2 million barrels per day in 2009. East Africa s largest economy Kenya is also suffering from acute power rationing because of dwindling hydropower production due to a drop in water levels at its Masinga dam. Peak power demand stands at about 1,050 MW against an installed capacity of 1,100 MW which includes emergency reserves. The Middle East could provide a much needed outlet for the more than 70 million barrels of fuel floating at sea. The demand here and from Africa won t absorb the surplus barrels completely but it will give traders an opportunity to move those barrels and take advantage of value, an Asia-based trader said. You have to remember a lot of these cargoes were picked up when the market was at very low levels, and I m sure they could maximize returns by moving the barrels out there. Distillates markets have been suffering due to a sharp contraction in global consumption levels due to the financial crisis. Asian gas oil cracks, or the value of refining a barrel of Middle East Dubai crude oil into diesel, was pegged at around $8 a barrel late last week, down from its peak last May when the crack was trading between $45 and $47 a barrel.
