Rotterdam-Singapore fuel oil arbitrage opens on weaker West, stronger East


The arbitrage window to move fuel oil from Rotterdam to Singapore has opened up for cargoes arriving in Singapore in the month of October, amid a weaker Rotterdam market and a slightly stronger Singapore market, trade sources said Thursday.

The main factor has been a weakening West market, where premiums to the FOB Rotterdam high sulfur barge market have fallen to around $1/mt, from $4/mt a few weeks ago, said traders.

The Singapore high sulfur fuel oil cargo market meanwhile, strengthened slightly, with the cash discount for 380 CST HSFO grade hovering at around 15 cents/mt to 30 cents/mt in the last two trading sessions, S&P Global Platts data showed.

This compares with deeper discounts seen from the month of May until recently, when the range was around minus $1/mt to near minus $5/mt, after several months of largely slow-moving activity in the Singapore market, according to trade sources and Platts data.

So far, around 2 million-3 million mt of arbitrage supply is estimated fixed for October delivery, with more fixtures expected to come, according to trade sources.

In comparison, September arrivals from the West to Singapore are estimated at around 3.7 million-4 million mt for now, with around one-eighth of that expected to be high density and high viscosity material, almost half of ready grade material for the bunker fuel market, and the rest a mix of straight run and cracked material, sources added.

It is the weakening West and strengthening East dynamic that has made the arbitrage slightly workable for October for now, with all other factors seeing more stability in the grand scheme of things, said one trade source.

The East-West spread has maintained at around $14/mt in the current spot market, not far from the $13-$15/mt seen in the months prior, sources noted.

Against this backdrop, VLCC freight rates for the Rotterdam-Singapore route are also around $2.75 million in the spot market, as compared to slightly higher rates in the previous months, trade sources also said.

The arbitrage window has been closed since March, while July saw a record low of 3.3 million mt from the West, said one trade source.

Source: Platts 

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