Asia Fuel Oil-Time spreads narrow due to ample prompt supplies


Asia’s fuel oil front-month time spread narrowed on Wednesday in a move that was more reflective of underlying supply conditions over the near term, traders said.

“Fundamentals aren’t there to support (spreads at) these levels,” a Singapore-based trader said adding that it was difficult to explain how current inventory levels in Singapore would warrant a steep backwardated structure for the 380-cst fuel over the near term.

Traders have said a widening of the near-term backwardation for 380-cst fuel oil seemed exaggerated in the light of arbitrage arrivals in February being at a nine-month high, as well as strong inflows in March.

The Intercontinental Exchange-traded 380-cst fuel oil March/April spread narrowed by 60 cents a tonne from the previous session, trading at $1.55 cents a tonne in backwardation by 1800 Singapore time (1000 GMT), industry sources said.

During the second half of the previous week, the 380-cst fuel oil March/April time spread soared, widening its backwardated structure while stirring expectations of a bullish trading strategy in the near term.

In the physical market, liquidity was thin as the number of standing bids at the end of the Platts trading window shrank to three, compared to eight on Tuesday, the sources said.

While there was a steady flow of supplier offers on Wednesday, asking prices were higher when compared to Tuesday. Data compiled by Reuters showed Wednesday’s best offers stood at about minus $2 a tonne to Singapore quotes, compared to around minus $1.20 a tonne on Wednesday.

In the United Arab Emirates, the Fujairah Oil Industry Zone on Wednesday reported a 2.2 percent increase in heavy distillates and residue inventories in the storage hub in the week to Feb.20, data via S&P Global Platts showed.

Fuel oil inventories in the storage hub rose 174,000 barrels (about 22,300 tonnes) from the previous week to 8.05 million barrels (or 1.2 million tonnes), a two-week high, the data showed.

The reported figures include fuel oil and other heavy fuels used for marine bunkers and power generation, but exclude non-energy residual products such as tar and bitumen, according to the S&P Global Platts website.

– U.S.-based Freepoint Commodities said on Tuesday it has expanded its presence in Asia, hiring 25 traders and support staff in recent months with an eye on opportunities in metals, oil and agricultural markets to meet demand in China.
– Oil traders from around the world, including the United States, Britain and Brazil, have tripled their sales to Asia as they take advantage of an emerging supply gap following OPEC-led production cuts announced late last year.

 FUEL OIL                                                                                  
 CASH ($/T)                 ASIA CLOSE       Change   % Change   Prev       RIC
 Cargo - 180cst                      321.44    -2.36      -0.73     323.80  FO180-SIN
 Diff - 180cst                        -0.28     0.17     -37.78      -0.45  FO180-SIN-DIF
 Cargo - 380cst                      315.36    -2.55      -0.80     317.91  FO380-SIN
 Diff - 380cst                        -1.53    -0.19      14.18      -1.34  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst           317.00    -2.50      -0.78     319.50  BK380-B-SIN
 Bunker (Ex-wharf) Premium             1.64     0.05       3.14       1.59

Source: Reuters

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