15-07-2016

Asia Fuel Oil-380-cst cash differentials weighed down by rising inventories

asiafuel

Cash differentials of Asia’s 380-cst fuel oil slipped on Thursday, dragged down by rising inventories over the past week despite market expectations of tight July supplies.

Singapore onshore stocks of residual fuel oil rose for a second straight week last week, climbing by 638,000 barrels (about 95,000 tonnes) to a total of 27.545 million barrels (approximately 4.1 million tonnes) in the week to July 13, official data showed.

“I don’t think many people were expecting that,” said one Singapore-based trader. “Everyone was worried about tighter supplies over July and August because an arbitrage window that was closed for quite some time.”

Total fuel oil flows into East Asia for July have been provisionally assessed at around 3 to 3.5 million tonnes, well below the 2015 monthly average of 6.3 to 6.5 million tonnes, and down nearly 25 percent on-month due to thin flows from the West and Middle East, assessments by Supply Chain and Commodities Research showed.

“Might be that some suppliers were holding fuel oil in floating storage in anticipation of the lower arbitrage flows in July and it’s just been
transferred to onshore,” said another Singapore-based trader.

“But still, there’s no denying that arbitrage flows have been on the decline and we’re bound to see significant inventory draws sooner or later,” the trader said.

Cash discounts of 380-cst fuel oil FO380-SIN-DIF were 25 cents lower on Thursday at $1.36 a tonne to Singapore quotes.

RELATED NEWS:
– U.S. gasoline and distillate stocks surged unexpectedly last week, data showed on Wednesday, crimping margins for refiners at the height of summer driving season, a time when they generally enjoy healthy demand and profits.

– China National Offshore Oil Company, or CNOOC, said it seeks to reign in total refining capacity and step up building gas stations in the next five years, citing concerns about a supply glut and margin pressures in the petrochemical industry.

– OPEC delegates say comments from top exporter Saudi Arabia, which two years ago led the group to drop its historic role of supporting oil prices, are a change in tone and a sign the kingdom is looking – verbally for now – to prop up the market.

SINGAPORE CASH DEALS – Three cash deals reported. For further details, please see

 FUEL OIL                                                                      
 CASH ($/T)        ASIA CLOSE      Change   % Change  Prev      RIC
                                                      Close     
 Cargo - 180cst            246.71    -4.52     -1.80    251.23  FO180-SIN
 Diff - 180cst               0.41     0.15     57.69      0.26  FO180-SIN-DIF
 Cargo - 380cst            238.94    -5.06     -2.07    244.00  FO380-SIN
 Diff - 380cst              -1.36    -0.25     22.52     -1.11  FO380-SIN-DIF
 Bunker                    240.44    -4.66     -1.90    245.10  BK380-B-SIN
 (Ex-wharf)-                                                    
 380cst                                                         
 Bunker                      1.50     0.40     36.36      1.10                 
 (Ex-wharf)                                                     
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Source: Reuters

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