Asia Fuel Oil-Time spreads stabilize after sharp losses


Asia’s near-dated time spreads on 380-cst fuel oil steadied on Friday after sharp losses over the past two days when more sellers came into the market, stalling a bull play at the start of March and pushing cash differentials lower.

“Time spreads stabilized today,” said a Singapore-based fuel oil trader.

“Some are staying on the sidelines after this week’s roller-coaster,” another trader said.

The premium on the March/April time spread for 380-cst fuel widened after two sessions of steep declines. The contract traded at 75 cents a tonne on Friday, up 50 cents a tonne from the previous session, but well below its weekly high of $3 a tonne touched on Tuesday, Reuters data showed.

By contrast, intense supplier selling and limited buying appetite continued to weigh on cash differentials in the physical market.

“It’s weak … there are too many sellers and some of their offers are quite aggressive,” a third trader said.

There were 35 standing offers for 380-cst fuel oil in the Platts window on Friday, countered by 10 bids for the fuel. This compares to just eight offers and six bids on Monday for the same fuel.

With only three window trades reported on Friday, compared to 22 on Wednesday, “this could have been the shortest, and most unsuccessful, bull play I’ve seen,” said a fourth trader.

Aggressive trading strategies occasionally rattle the fuel oil market, often leading to sharp swings across cash and derivatives prices amid increased trading activity.

Expectations of a bullish trading strategy peaked among industry participants by mid-February after trading volumes of 380-cst front-month time spreads jumped and open interest (OI) levels of the 380-cst March swaps contract soared.

Fuel oil stocks independently held in storage in the Amsterdam-Rotterdam-Antwerp (ARA) region slipped 1.7 percent in the week to March 2 amid firm exports to Singapore, data from Dutch consultancy PJK International showed.
“Imports from Russia (were) not entirely offsetting exports to Singapore,” said PJK.

ARA residual fuel inventories STK-FO-ARA were 14,000 tonnes lower from the previous week at 817,000 tonnes.

Compared with the same time last year, however, fuel oil inventories in the ARA hub were 28 percent lower.

This came after official data on Thursday showed onshore inventories in Singapore held near the previous week’s seven-month high of 3.98 million tonnes despite a 21 percent drop in net imports.

– The world’s top crude exporter Saudi Arabia cut April prices of light crude it sells to Asia for the first time in three months in a bid to shore up demand in an oversupplied market, trade sources said on Friday.

 FUEL OIL                                                                                   
 CASH ($/T)                 ASIA CLOSE       Change   % Change   Prev       RIC
 Cargo - 180cst                      315.94    -0.78      -0.25     316.72  FO180-SIN
 Diff - 180cst                        -1.40    -0.23      19.66      -1.17  FO180-SIN-DIF
 Cargo - 380cst                      311.81    -1.62      -0.52     313.43  FO380-SIN
 Diff - 380cst                        -0.85    -0.72     553.85      -0.13  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst           314.50    -1.50      -0.47     316.00  BK380-B-SIN
 Bunker (Ex-wharf) Premium             2.69     0.12       4.67       2.57

Source: Reuters 

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