05-10-2016

Asia Fuel Oil-‘Overbought’ cracks slide to 5-week lows

AsiafuelO

Asia’s fuel oil crack for the benchmark 180-centistoke fuel oil slid to its widest discount to Dubai crude in over a month, in what traders view is a market correction from an ‘overbought’ situation over the past few weeks.

“I think its more because the cracks were way too high to begin with, and even now they are not that weak historically speaking,” said a Singapore-based trader.

“It’s more of a correction of an overbought situation,” the trader said.

Throughout the third quarter of the year, limited arbitrage volumes had placed a downward pressure on supplies, boosting fuel oil cracks to their highest in about eight months on Sept. 20.

Since then, Western arbitrage volumes have improved, but still remain below their yearly average, along with Middle Eastern flows as cooling demand in the summer months there eases.

However, this recovery in arbitrage flows alone is not substantial enough to weigh down on the market, industry sources said.

“Arabian Gulf flows are up slightly but only to normal levels at one million tonnes or so,” said another Singapore-based trader.

The 180-cst crack to Dubai crude fell for a sixth consecutive session to minus $5.76 on Tuesday, down 7 cents from the previous session.

Since the start of the year, front-month fuel oil cracks have averaged minus $6.4 a barrel and minus $5 a barrel in the third quarter.

The weaker market was also reflected in the time spreads of the 380-cst fuel oil as a result of consumer hedging in 2017 and 2018 as well, industry sources said.

The Nov/Dec time spreads of 380-cst fuel was trading 50 cents lower from the previous session on the Intercontinental Exchange (ICE) at a discount of 75 cents a tonne to Singapore quotes by 1710 Singapore time (0910 GMT).

Similarly, the Dec/Jan time spreads were also 45 cents down from the previous session, trading at 45 cents a tonne to Singapore quotes.

    TENDERS & AWARDS:
    
 OUTSTANDING ASIA/MIDEAST FUEL OIL TENDERS:
 ISSUER            GRADE:                      VOLUME:   DELIVERY     CLOSE (VALID)
                                                         DATE:        
 **Taiwan/CP  B: LSFO max 0.5% S (Kaohsiung,   40KT      Nov 1-30     Oct 6
 C            Keelung, Taichung, or other)                            
 **Taiwan/Fo  S: 35cst PFO  0.2% S max         13KT      Oct 24-26    Oct 5 (Oct 5)
 rmosa        (Mailiao)                                               
 Taiwan/Form  S: 380cst max 4% S (Mailiao)     40KT      Oct 13-15    Sept 30
 osa                                                                  
 UAE/ADNOC    S: SRFO (Ruwais)                 80KT      Oct 15-17    Oct 4 
 India/Relia  S: CBFS max 1.7% S (Sikka)       20KT      Oct 19-20    Sept 28 (Sept 29)
 nce                                                                  
              S: CBFS max 3% S (Sikka)         60KT      Oct 19-20    Sept 28 (Sept 29)
                                                                                       
 RECENT ASIA/MIDEAST FUEL OIL TENDER AWARDS, SPOT SALES:
 ISSUER            GRADE:                      VOLUME:   DELIVERY     RESULT
                                                         DATE:        
 Thailand/IR  S: LCO (Rayong)                  5KT       Oct 28-30    PTT/ 180 MOPS +$80-90
 PC                                                                   
 India/IOC    B: 180cst LSFO 1% S (Mangalore)  15KT      Nov 15-19    Glencore/ 180 MOPAG around +$65 CFR
                                                                      or FOB
 India/IOC    S: 380cst (Chennai)              35KT      Oct 22-24    Gunvor/ 380 MOPS & Argus Avg -$6-$7
 India/IOC    S: 380cst (Chennai)              35KT      Oct 14-16    Gulf Petrochem/ 380 MOPS & Argus
                                                                      Avg -$6-$7
    SINGAPORE CASH TRADES: Two cash deals reported. For further details, please see       
    
 FUEL OIL                                                                                  
 CASH ($/T)                 ASIA CLOSE      Change   % Change   Prev       RIC
                                                                Close      
 Cargo - 180cst                     266.62    -6.61      -2.42     273.23  FO180-SIN
 Diff - 180cst                        0.68    -0.48     -41.38       1.16  FO180-SIN-DIF
 Cargo - 380cst                     259.28    -5.54      -2.09     264.82  FO380-SIN
 Diff - 380cst                       -0.41     0.35     -46.05      -0.76  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst          261.58     0.00       0.00     261.58  BK380-B-SIN
 Bunker (Ex-wharf) Premium            2.30     5.54    -170.99      -3.24                  
                                                                                           
 Source: Reuters
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