30-07-2016

Asia Fuel Oil-Markets steady; participants expect strengthening in August

AsiaFuelO

Asia’s fuel oil markets were steady on Friday compared with the previous session, amid muted trading activity, but market participants are optimistic that the markets will begin to strengthen as tightening supplies take effect, traders said.

“It’s been quiet so far and spreads have been trading in a very tight range,” said a Singapore-based paper trader.

“With such a consolidation, you will tend to expect a breakout to follow soon,” the trader said.

Both the front month Aug/Sept and further-dated Sept/Oct time spreads for the 380-cst fuel oil were unchanged from the previous session, remaining at a contango of $1.50 and $1 a tonne to Singapore quotes by Asia close, respectively.

Industry participants are expecting near-term 380-cst fuel time spreads to narrow their contango structure as a result of months of below average fuel oil arbitrage volumes and tightening Singapore supplies.

Total fuel oil flows into East Asia for July have closed at 3.4 to 3.5 million tonnes, well below the monthly year-to-date 2016 average of 5.6 to 5.9 million tonnes, according to assessments by Thomson Reuters Supply Chain and Commodities Research released on Thursday.

While July flows represent the lowest volumes in 50 months, cumulative August flows based on provisional assessments to date show that arrivals are already up 15.8 percent from last month at 4.0 to 4.1 million tonnes, said Luke Pachymuthu, manager for crude and fuel oil, at Thomson Reuters Supply Chain and Commodities Research in Singapore.

In cash markets, although a total of 120,000 tonnes of fuel oil was reported to have traded in the Platts window through five deals, consisting of 20,000 tonnes of the 180-cst fuel oil and 100,000 tonnes of the 380-cst grade, cash differentials were little changed from the previous session.

Cash discounts of the 180-cst fuel FO180-SIN-DIF were 4 cents wider at $1.87 a tonne to Singapore quotes, while discounts of the 380-cst fuel FO380-SIN-DIF narrowed to $1.75 a tonne, up 14 cents from the previous session.

JAPAN CONSUMPTION DROPS:
Fuel oil consumption for power generation in Japan fell in June as utilities shifted to alternative fuels, the trade ministry data showed on Friday.

June sales of B-, C-type fuel oil were 212,100 barrels per day, down 16.6 percent compared to last year, marking the 41th-straight month of year-on-year declines.

This reflects the utilities’ shift to coal and gas for power generation amid the slow resumption of nuclear power, an official with the Ministry of Economy, Trade and Industry said.

RELATED NEWS:
– Oil’s recovering fundamentals remain fragile, with many global factors offsetting each other, leaving a firmer U.S. dollar as the main driver of lower prices recently, Goldman Sachs said in a note this week.

– Imports of Iranian oil by four major buyers in Asia in June jumped 47.1 percent from a year ago to the highest level in more than four years, evidence Tehran’s aggressive moves to recoup market share, lost under international sanctions, is paying off.

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

 FUEL OIL                                                                                  
 CASH ($/T)                  ASIA CLOSE       Change   % Change  Prev      RIC
                                                                 Close     
 Cargo - 180cst                       218.63    -4.92     -2.20    223.55  FO180-SIN
 Diff - 180cst                         -1.87    -0.04      2.19     -1.83  FO180-SIN-DIF
 Cargo - 380cst                       213.04    -4.30     -1.98    217.34  FO380-SIN
 Diff - 380cst                         -1.75     0.14     -7.41     -1.89  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst            214.04    -4.30     -1.97    218.34  BK380-B-SIN
 Bunker (Ex-wharf) Premium              1.00     0.00      0.00      1.00

Source: Reuters

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