Australia's Santos Ltd has sold a 175,000-barrel cargo of Van Gogh crude loading March 29-April 2 to trading house Vitol at a premium of $15-$16 a barrel to dated Brent, well below the last traded level, three sources familiar with the deal said on Thursday.
Japanese trader Mitsui & Co in January bought a cargo of the heavy sweet crude for March loading from Japanese explorer Inpex Corp at a premium of $27-$28 a barrel to meet shippers' demand for low-sulphur fuel.
Asia's very low sulphur fuel oil (VLSFO) market has retreated from its record highs near the start of the year when new ship fuel rules came into force, while the coronavirus outbreak has weighed on overall crude demand and market sentiment.
The deal could not be independently verified as the companies typically do not comment on such commercial matters.
Trading companies blend the crude with other fuel to produce VLSFO, a new ship fuel containing 0.5% sulphur which meets emission rules set by the International Maritime Organization which took effect last month.
Front-month backwardation in the VLSFO market fell from a record $22 a tonne on Jan. 20 to $2 a tonne earlier this week while its refining margin fell to a 2-1/2 month low of $16.35 a barrel above Brent crude, down from a record $29.35 at the start of 2020, Refinitiv Eikon data showed.
Santos will carry out maintenance between April and August at its offshore production unit that produces Van Gogh crude.
(Reporting by Shu Zhang; Editing by Richard Pullin and Tom Hogue)