03-08-2016

Asia Fuel Oil-380-cst contango narrows as supplies seen tightening

fueloil

Asia’s 380-cst fuel oil narrowed its contango structure while the front month East-West (EW) arbitrage spread continued to edge away from a recent three-year low amid expectations of tightening near-term supplies in the Singapore trading hub, traders said.

“Sentiment seems to be shifting,” said a Singapore-base trader. “Given the low arbitrage volumes over the past few months, and fewer offshore storage levels, we might finally see some real tightness in August and September (fuel oil) supplies,” the trader said.

Despite three months of falling arbitrage flows into Singapore, official data showed onshore inventories of Singapore fuel oil rising 11 percent in the first three weeks of July as floating inventories were transferred ashore, contradicting expectations of tightening July supplies.

However, last week official data showed a 6 percent drop in onshore Singapore stocks to a one-month low of 26.63 million barrels in the week to July 27, in what industry participants said potentially signalled a delayed start to tightening supplies.

Prompted by expectations of supply constraints, both the Aug/Sept and Sept/Oct time spreads for the 380-cst fuel narrowed their contango
structures by 50 cents to minus $1.50 and $1 a tonne to Singapore quotes on Tuesday, respectively.

Meanwhile, the front month EW arbitrage spread, the price difference between FOB Singapore 180-cst high-sulphur fuel oil and FOB Rotterdam barge fuel oil with maximum 3.5 percent sulphur, continued to recover from a three-year low of $12.50 a tonne to Singapore quotes seen on Friday, rising to $15.75 a tonne but still well below the 2016 daily average of $21.23 a tonne.

In physical markets, cash discounts of the 380-cst fuel FO380-SIN-DIF narrowed 11 cents to $2.34 a tonne to Singapore quotes.

Four 380-cst fuel oil cash deals totalling 80,000 tonnes were traded in the Platts window on Tuesday alongside another two 180-cst deals totalling 40,000 tonnes, industry sources said.

TENDERS & AWARDS:

– State-owned Indian Oil Corporation (IOC) is offering 35,000 tonnes of 380-cst fuel oil for Aug. 26-28 loading from the port of Chennai, industry sources said.

The tender closes on Aug. 3.

– Taiwan’s Formosa sold 13,000 tonnes of 35-cst pyrolysis fuel oil (PFO) to Taiwan-based Simosa at a premium of $30 to $35 a tonne to 180-cst Singapore quotes, sources said.

The cargo is scheduled for delivery between Aug. 15-17 at the port of Mailiao.

RELATED NEWS:

– Japanese oil refiner Idemitsu Kosan Co said it shut the 24,000 barrel per day (bpd) vacuum distillation unit at its 160,000-bpd Hokkaido refinery, north of Japan, on Tuesday after the unit caught fire.

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

 FUEL OIL                                                                                 
 CASH ($/T)                  ASIA CLOSE       Change   % Change  Prev      RIC
                                                                 Close     
 Cargo - 180cst                       212.76    -9.42     -4.24    222.18  FO180-SIN
 Diff - 180cst                         -2.09    -0.62     42.18     -1.47  FO180-SIN-DIF
 Cargo - 380cst                       206.82    -8.32     -3.87    215.14  FO380-SIN
 Diff - 380cst                         -2.34     0.11     -4.49     -2.45  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst            208.32    -8.52     -3.93    216.84  BK380-B-SIN
 Bunker (Ex-wharf) Premium              1.50    -0.20    -11.76      1.70

Source: Reuters

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