* Qatar's DFC premium for March hits 1-year high
* Petchem, middle distillates drive Asia's demand
* New condensate flows from Australia could cap gains
By Jessica Jaganathan and Florence Tan
SINGAPORE, Jan 29 (Reuters) - Asian refiners and petrochemical makers are snapping up cargoes of Qatari condensates, driving a rally in spot prices for the ultra-light crude as some producers such as Iran and Malaysia curb supplies of their grades of the light oil.
Condensate use in Asia has jumped in recent years as companies brought new splitters online in South Korea, Singapore and the Middle East. Supplies have not kept up, and prices and processing profits for the light oil have grown.
Key spot grade Qatari Deodorized Field Condensate (DFC), for example, traded last week at the highest premium in a year, boosted by demand from South Korea, several traders with trading houses and refiners said.
Qatar's condensate exports could fall in the second quarter as the world's top liquefied natural gas (LNG) producer shuts some units for maintenance, one of the traders said. Qatar Petroleum declined to comment.
Asia's shortfall of condensate is expected to widen to more than 90,000 barrels per day this year, from about 70,000 bpd in 2017, said Ong Han Wee, a senior analyst at consultancy FGE.
"The recent price rally was caused by supply disruption from Iran," Ong said.
Iran is expected to ramp up condensate output from new gas fields in South Pars, but it also plans to start up a second 120,000-bpd splitter at Persian Gulf Star Petrochemical this year and that will reduce Iran's exports, he said.
"Two LNG projects in Australia - Wheatstone and Ichthys - could moderate the supply tightness ... but it depends on when Ichthys will start up," he said.
Condensate is often produced alongside natural gas, and processed in refining units known as splitters to produce naphtha, a primary petrochemicals feedstock.
Iranian oil tanker Sanchi was carrying 111,300 tonnes of condensate when it collided with a Chinese freighter earlier this month and sank. That is also boosting condensate prices, traders said.
Top condensate buyers in Asia include Hanwha Total Petrochemical, Hyundai Chemical, ExxonMobil. Qatar, Iran and Australia are the key suppliers to Asia.
Recent strength in margins for petrochemicals, diesel and jet fuel have increased buyers' ability to pay higher prices for the light oil, said a Singapore-based trader.
"People often forget that condensate has a heavy middle distillates yield as well as lights, so it's very popular and the firm middle distillates margin is supportive of condensate now," he said.
A widening of Brent's premium to Dubai crude to its highest in nearly two years also boosted demand for condensate priced off the Middle East oil, traders said. DUB-EFS-1M
"It's cheaper to buy Dubai-linked grades ... so we can turn to Qatar's DFC and LSC (low-sulphur condensate) for spot cargoes," a South Korean industry source said.
A disruption of Kimanis condensate out of Malaysia has provided further support to the market, traders said.
A gas leak caused Petronas to stop natural gas flows from the Sabah Oil and Gas terminal to its LNG complex in Bintulu. That is expected to delay Kimanis cargoes by several months, according to two sources familiar with the matter.
Petronas has said its LNG deliveries are not affected by the gas leak. It has not said if condensate cargoes are affected. (Reporting by Jessica Jaganathan and Florence Tan; Editing by Tom Hogue)