UPDATE 2-Saudi buys 3 mln bbls fuel from Japanese trader

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By Felicia Loo and Luke Pachymuthu

SINGAPORE/DUBAI, Feb 2 (Reuters) - Saudi Aramco has agreed to buy about 3 million barrels of gas oil from Japanese trader Itochu, as rapidly rising demand for transport and power force the top oil exporter to import, traders said on Monday.

The traders said state-run Aramco will import the gas oil, which includes diesel, from the Itochu Corp (8001.T: Quote, Profile, Research) unit from March through December to the Red Sea region, where it is short on diesel.

The Kingdom of Saudi Arabia has bought gas oil on the spot market for at least two years. Aramco has avoided long-term supply deals as the Kingdom strives for fuel self sufficiency.

Demand has been fuelled by heavy investment in economic development financed by record crude export revenues. It also may have been further fuelled by the need to burn oil products in some power stations instead of gas as the kingdom cuts oil output.

Saudi is pumping oil at its lowest level in more than six years as it cuts production in line with a deal with the Organization of the Petroleum Exporting Countries (OPEC). Most Saudi gas is a by-product of oil output, so volumes fluctuate with oil output.

"If this is in fact the case then we will be seeing them buying more on the spot market and possibly even taking out more term deals," one trader said.

Aramco will not be a net importer of the full 3 million barrels bought from Itochu, as the deal includes a partial swap agreement under which Itochu will take a smaller number of lower quality gasoil cargoes from the east coast, traders said.