25-02-2017

Asia Fuel Oil-Time spreads hold firm, cash discounts narrow

AsiaFuel

Fuel oil front-month time spreads were steady on Friday having widened slightly since the start of the week, while discounts on the 380-cst grade for prompt delivery narrowed on firmer bids.

The March/April time spread for the 380-cst fuel was unchanged from Thursday at a $2.25 a tonne premium, but was slightly up from the $2 a tonne premium at the start of the week, Reuters data showed.

Because fuel oil supplies in Singapore are on the rise, reaching a seven-month high on Thursday, coupled with sluggish bunker fuel demand throughout February, traders put the strength in time spreads down to a trading play.

In the physical markets, cash discounts of the actively traded 380-cst fuel oil FO380-SIN-DIF rebounded from its seven-month low in the previous session despite no trades being reported in the Platts window on Friday.

Traders said that the way in which bids and offers are priced across the physical window, with a narrower bid-offer spread and generally higher bid-offer levels at the back end of the window, suggests that “the second-half (of March) is probably tighter”.

Total fuel oil flows into East Asia for February are expected to exceed the previous month’s nine-month high of 7.3 million to 7.4 million tonnes, lifted by 11-month high Western arrivals, while March supplies are seen boosted by the expectation of yet another bull trading play, assessments by Thomson Reuters Oil Research showed.

ARA INVENTORIES:

Fuel oil stocks independently held in storage in the Amsterdam-Rotterdam-Antwerp (ARA) region were up by 6 percent in the week to Feb. 23 as imports from Russia continued to rise, data from Dutch consultancy PJK International showed.

ARA residual fuel inventories STK-FO-ARA were 47,000 tonnes higher from the previous week a total of 831,000 tonnes.

Compared with the same time last year, however, fuel oil inventories in the ARA hub were 33 percent lower.

This came after official data on Thursday showed onshore inventories in Singapore jumped 10.8 percent, or 386,000 tonnes, to a seven-month high of 3.98 million tonnes amid a drop in exports of the industry fuel from the city-state in the week to Feb. 22.

RELATED NEWS:

– Traders are selling oil held in tankers anchored off Malaysia, Singapore and Indonesia in a sign that the production cut led by OPEC is starting to have the desired effect of drawing down bloated inventories.

– Oil investors have placed the biggest bet in history that prices will rise, as the world’s largest exporters cut output to reduce a glut in supply, and the futures market is suggesting for the first time in a year that they could be onto a winner.

 FUEL OIL                                                                                  
 CASH ($/T)                 ASIA CLOSE       Change   % Change   Prev       RIC
                                                                 Close      
 Cargo - 180cst                      322.99    -0.23      -0.07     323.22  FO180-SIN
 Diff - 180cst                        -0.34    -0.19     126.67      -0.15  FO180-SIN-DIF
 Cargo - 380cst                      317.39     0.30       0.09     317.09  FO380-SIN
 Diff - 380cst                        -0.68     0.56     -45.16      -1.24  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst           318.75     0.50       0.16     318.25  BK380-B-SIN
 Bunker (Ex-wharf) Premium             1.36     0.20      17.24       1.16

Source: Reuters

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