16-02-2017

Asia Fuel Oil-Prompt time spreads spike, market braces for bullish trades

fuel

The prompt month time spreads of Asia’s 380-cst fuel oil spiked on Wednesday, widening their backwardated structure while stirring expectations of a bullish trading strategy in the near term.

Singapore fuel oil trading volumes have soared after 380-cst front-month time spreads on the Intercontinental Exchange (ICE) widened by more than $1 per tonne from the previous day.

“The current push in price is just result of anticipation that there is going to be a play,” said one Singapore-based fuel oil trader.

Some industry participants were expecting a bullish trading strategy to emerge in the next few weeks based on several market cues including tightening supply fundamentals around March and April, a spike in the 380-cst March swap open interest (OI), as well as increased vessel chartering activity by certain traders that would be used to store and transport the large quantities of the purchased fuel.

“I think shorts (in the March/April spreads) capitulated as the rising OI suggested (it’s) game on next month,” another trader said.

The Intercontinental Exchange (ICE) traded 380-cst March/April time spread contract rose to as much as $2 a tonne in early Asian trading, up by about $1.25 a tonne from the same time in the previous session, industry sources said.

While the March/April time spread pared some of its gains during the Platts window on Wednesday, the contract resumed its upward trajectory, rising to about $2.50 a tonne by 1815 Singapore time (1015 GMT), sources said.

 FUEL OIL                                                                                  
 CASH ($/T)                 ASIA CLOSE       Change   % Change   Prev       RIC
                                                                 Close      
 Cargo - 180cst                      324.06     2.13       0.66     321.93  FO180-SIN
 Diff - 180cst                         0.71     0.28      65.12       0.43  FO180-SIN-DIF
 Cargo - 380cst                      317.74     2.80       0.89     314.94  FO380-SIN
 Diff - 380cst                         0.31     0.82    -160.78      -0.51  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst           318.00     1.75       0.55     316.25  BK380-B-SIN
 Bunker (Ex-wharf) Premium             0.26    -1.05     -80.15       1.31

Source: Reuters 

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