Higher fuel bills likely

LONDON – Greek homeowners could be saddled with higher fuel bills because of an archaic oil purchasing mechanism used by Hellenic Petroleum, international oil traders said yesterday. The Greek tender system, which pits powerful trading houses against the state-controlled oil company, has netted traders an extra $1 million in January alone, according to dealers involved in the opaque market for refined oil in the Mediterranean. «There is not a trader in the world who is completely innocent on this sort of deal,» one player familiar with the tender said. «Everyone tries to influence the position in his favor.» After years of paying artificially inflated prices for their oil, many European utilities have abandoned spot tendering in favor of spot market purchases or long-term contracts that are harder to manipulate. Greece buys about 650,000 tons of heating oil every winter under an annual tender issued in October. This year it tendered for additional first-quarter volumes of 250,000 tons through Hellenic Petroleum, which controls 56 percent of the domestic market. The tenders are often accompanied by a spike in cash prices used as the basis for many oil-trading contracts worldwide. Last month, high futures-related bidding in the Mediterranean, with restrictive dates and shipping requirements, pushed up the premium of Mediterranean reference prices over futures traded in northern Europe. The cash differential rose from $2.50 a ton on January 2 to +$9.50 at the end of last week – a rise of $12 over the month, which translates into more than $1.2 million for every 100,000 tons. Some traders said market fundamentals did not justify the prices, as heating oil was plentiful after the end of the early-January cold snap in Greece and Turkey. Happy with tender system The tender winners shipped three 30,000-35,000 ton cargoes of heating oil to Greece in the second half of the month and the pricing mechanism meant the sellers wanted high reference prices for a five-day window after the vessel’s arrival in Greece. Hellenic Petroleum dismissed the allegations and said outright that mean fob quotes had fluctuated only a few dollars in January. «So far, we are happy with the tender system,» corporate affairs head Evangelos Stranis said. «While it does not exclude other approaches on our side if the price is right, we believe tenders help us achieve the best price for Greek consumers.» Hellenic also said that the tender prices were low at $7-$7.50 a ton over the reference Mediterranean prices – several dollars below the price of the company’s previous tender in autumn 2001. But traders said this arrangement encourages winners to bid high numbers on the International Petroleum Exchange (IPE) related market, to keep the fob differentials versus the IPE average as high as possible. A trader with one of the tender winners said that poor vessel quality was the reason why they did not buy cargoes offered at lower prices at the same time. But Greek consumers eventually will foot the bill for any premiums paid. One Hellenic official, speaking on condition of anonymity, said that high cargo prices in the end were compensated by more expensive prices on the retail market. As far as the trade is concerned, the only way to make money in an increasingly competitive market is to move the market in sellers’ favor, dealers said. «Pricing in and pricing out – it’s the name of the game. If someone can’t cope with it, they shouldn’t be here,» one said.

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