23-04-2016

Asia Fuel Oil-Prompt spreads narrow further amid tighter May supplies

fueloil

The front month time spreads of Asian fuel oil continued to edge higher on Friday in response to tightening supplies expected throughout May, traders said.

Western arrivals into East Asia for May looked set to remain thin at 3.5 to 4.0 million tonnes, based on assessments by Thomson Reuters Oil Research and Forecasts released on Tuesday.

May arrivals are well below the running monthly average of 4.87 million tonnes in the year up to April and would be the lowest since December with less than a week of the May tanker-fixing window open, according to the assessments.

The May-June contract for 380cst fuel oil narrowed its contango for a second consecutive session, shrinking by 25 cents to minus $1 a tonne to Singapore quotes on Friday. Earlier this week, the contango structure of the same contract was notably wider at minus $3.25 a tonne to Singapore quotes on Monday.

In physical trades, two deals were reported totalling 40,000 tonnes of 380cst fuel oil with Vitol and Mercuria lifting offers from Coastal and Lukoil, respectively.

Vitol bought one 20,000 cargo from Coastal at a discount of $1.50 a tonne to Singapore quotes and loading between May 14 and 18, while Mercuria bought the other from Lukoil at a discount of $1 a tonne to the average of May Singapore quotes loading between May 12 and 16, industry sources said.

On Thursday, Hin Leong sold 20,000 tonnes of 380cst fuel oil to Coastal for May 17 to 21 delivery at $200.25 a tonne, equivalent to a discount of about minus $1.60 a tonne to Singapore quotes, sources said.

As a result of the slightly stronger physical transactions on Friday, cash differentials of 380cst also narrowed their discount by 6 cents from Thursday to minus $1.32 a tonne to Singapore quotes.

TENDERS & AWARDS:
Taiwan’s refiner Fermosa sold 40,000 tonnes of 280cst high sulphur fuel oil to independent trader Gunvor at a discount in excess of $20 a tonne to Singapore 180cst quotes and loading between May 1-3, industry sources said.

Fermosa last sold a similar parcel for delivery between April 8-10, the results of which are unknown.

RELATED MARKET NEWS:
– The recent rally in commodity prices is not supported by fundamentals in the physical markets, Goldman Sachs said, adding that oil could see downside risks in the near term.

“While this recent rally has the potential to run further to the upside … we believe that it is not yet driven by a sustainable shift in fundamentals,” Goldman Sachs analysts said in a note on Friday.

– Freight rates for very large crude carriers (VLCCs) will come under further pressure next week if the current sluggish chartering activity continues, ship brokers said on Friday.

“The market dipped sharply,” said a European supertanker broker on Friday. “What’s puzzling everybody – owners, brokers – is why it’s so quiet in the market when Saudi Arabia, Iraq and Russia are still pumping oil.”

SINGAPORE CASH DEALS - Two deals reported. For further details, please see 
  
 FUEL OIL                                                                                          
 CASH ($/T)                 ASIA CLOSE         Change     % Change     Prev Close   RIC
 Cargo - 180cst                        201.75      -2.58        -1.26       204.33  FO180-SIN
 Diff - 180cst                          -1.45       0.11        -7.05        -1.56  FO180-SIN-DIF
 Cargo - 380cst                        197.65      -2.64        -1.32       200.29  FO380-SIN
 Diff - 380cst                          -1.32       0.06        -4.35        -1.38  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst             198.90      -2.89        -1.43       201.79  BK380-B-SIN
 Bunker (Ex-wharf) Premium               1.25      -0.25       -16.67         1.50

Source: Reuters

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