21-07-2016

Asia Fuel Oil-380-cst time spreads slide

fueloil

Time spreads of benchmark 180-cst and 380-cst fuel oil fell in early Wednesday trading but recovered some of their losses towards, traders said.

“Recent weakness seem to be due to change in sentiment during window trade but that can change quickly too,” said one Singapore-based trader.

“I think there’s quite a lack of market conviction for the time being.”

On the Intercontinental Exchange (ICE), the prompt 380-cst fuel oil Aug/Sept time spread widened its contango structure to as much as minus 75 cents in early trading before recovering to minus 65 a tonne to Singapore quotes around 16:30 Singapore time, industry sources said.

The forward 380-cst Sept/Oct time spread also widened its contango structure in ICE to as much as minus $1 before recovering to minus 50 cents a tonne to Singapore quotes.

Moreover, ICE volumes were relatively ‘heavy’ on Wednesday with the 380-cst Aug/Sept spreads trading a total of about 620,000 tonnes and the Sept/Oct contract trading a total of about 515,000 tonnes, sources said.

“Seems like the front-end weakness (in the time spreads) is driven by changing sentiment and people are losing faith in the supposed near-term tightness in supplies,” said a second Singapore-based trader. “I suppose tomorrow’s (onshore Singapore) inventory data will help shed some light on the situation.”

With a shut arbitrage window restraining flows into East Asia in June and July, participants largely expected the markets to strengthen in July on the back of narrowing supplies and firm bunker demand.

Wednesday’s more bearish sentiment also spilled into the physical markets with discounts of the 380-cst fuel oil FO380-SIN-DIF widening 66 cents to minus $2.16 a tonne to Singapore quotes while differentials of the 180-cst fuel FO180-SIN-DIF flipped from yesterdays 7 cent premium to a discount of 19 cents a tonne to Singapore quotes.

“Suppliers seemed more aggressive today, offering cargoes at deeper discounts from yesterday,” said a third Singapore-based trader.

Ex-wharf premiums for the 380-cst fuel rose to 20 cents to $2.20 a tonne to Singapore quotes despite today’s broader market weakness.

TENDERS:
– State-owned Indian Oil Corporation (IOC) is seeking 15,000 tonnes of 180-cst high-sulphur fuel oil for deliver between Sept 6 and 10 at the port of Mangalore on a cost and freight basis.

RELATED NEWS:
– China’s June fuel oil output rose 20.6 percent from last year to 2.47 million tonnes.

– Indonesia will price its crude grades against dated Brent from July, the first change to its oil price formulas since 2007, a senior government official said on Wednesday.

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

 FUEL OIL                                                                                 
 CASH ($/T)                 ASIA CLOSE       Change   % Change  Prev      RIC
                                                                Close     
 Cargo - 180cst                      239.49    -4.11     -1.69    243.60  FO180-SIN
 Diff - 180cst                        -0.19    -0.26   -371.43      0.07  FO180-SIN-DIF
 Cargo - 380cst                      232.26    -4.75     -2.00    237.01  FO380-SIN
 Diff - 380cst                        -2.16    -0.66     44.00     -1.50  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst           234.46    -4.55     -1.90    239.01  BK380-B-SIN
 Bunker (Ex-wharf) Premium             2.20     0.20     10.00      2.00

Source: Reuters

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