Asia Fuel Oil-Falling Singapore inventories boost paper markets, but cash premiums slip


Improved sentiment lifted Asia’s fuel oil paper markets after official data showed Singapore’s onshore inventories of fuel oil sunk to their lowest in about four months, but cash premiums eased amid weaker deal values.

On the Intercontinental Exchange (ICE), near-dated fuel oil swaps and time spreads saw trade volumes spike beyond a million tonnes while lifting prices and premiums higher.

– Singapore onshore fuel oil inventories fell 15 percent, or 540,000 tonnes, to their lowest since Jan. 4 at a total of 2.97 million tonnes in the week to May 10, IE Singapore data showed on Thursday.

– The latest inventory draw is the largest in volume since March 23, 2016 when inventories fell 565,000 tonnes.

– While this came despite little change to net imports, which were 2 percent lower from the previous week to 520,000 tonnes, traders said movement of cargoes into floating storage, along with firm bunker fuel demand, contributed to the inventory draws.

– The ICE-traded 380-cst June/July spreads contract rose to 50 cents a tonne, up 25 cents a tonne from the previous session, after trading nearly 1.1 million tonnes in contracts by 4:30 p.m. Singapore time (0830 GMT) on Thursday.

– Activity in the ICE-traded 380-cst June and July futures contracts was also elevated on Thursday with each trading more than 1.1 million tonnes in contracts during the same time.

– The elevated trade activity pushed Open Interest (OI) levels of the June contract to just over 9.5 million tonnes, slightly below the near 10 million tonne record for the March contract seen earlier in the year.

– In another sign of improved sentiment, the ICE-traded 380-cst crack to Brent crude was also trading at a narrower discount despite rising crude prices, traders said.

– Four cargo trades were reported in the Platts window on Thursday totalling 80,000 tonnes of 380-cst fuel oil through four cargoes.

– Cash premiums of 380-cst and 180-cst fuel oils were pressured on Thursday amid relatively weaker deal values and lower buyer bids.

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– Low rates for newbuild VLCC’s appears to have spurred a buying spree by shipowners, said JBC Energy on Wednesday.

– 30 VLCC’s added to orderbook this year versus 13 in 2016, according to shipbroker Gibson, as quoted by Hellenic Shipping News.

– “Many of the new orders will only be delivered in 2019 which is great timing considering that they will hit the water ahead of the IMO fuel shift,” said the research consultancy.

– Assuming these newbuilds will be fitted with the latest sulphur emission reducing scrubbers, they “would have a key advantage over the lion’s share of the existing fleet.”

– JBC estimates the spread between 0.5 percent sulphur bunker fuel and high-sulphur fuel oil in 2020 at around $40 per barrel, but will more than halve by 2024.

 FUEL OIL                                                                                 
 CASH ($/T)                 ASIA CLOSE      Change   % Change   Prev       RIC
 Cargo - 180cst                     303.97     8.94       3.03     295.03  FO180-SIN
 Diff - 180cst                        3.75    -0.34      -8.31       4.09  FO180-SIN-DIF
 Cargo - 380cst                     294.88     8.79       3.07     286.09  FO380-SIN
 Diff - 380cst                        2.66    -0.28      -9.52       2.94  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst          298.50     8.50       2.93     290.00  BK380-B-SIN
 Bunker (Ex-wharf) Premium            3.62    -0.29      -7.42       3.91

Source: Reuters

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