28-06-2017

Asia Fuel Oil-Arbitrage spread slips, lower July arrivals expected

Asiafuel

The front-month East-West (EW) arbitrage spread remained under pressure on Tuesday after steep losses in the previous two sessions took the spread towards a two-week low, underlining expectations of relatively lower arrivals into Asia in July and August.

TIGHTER ARBS – The ICE-traded July 380-cst EW spread slipped to about $13.50 a tonne by 5:30 p.m. Singapore time (0930 GMT) on Tuesday, down from about $14 a tonne on Friday. – The tighter arbitrage spread was partly a response to falling fuel oil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) oil hub which in turn helped boost the July 380-cst barge spread. – Western fuel oil flows into East Asia for July were notionally assessed at about 2.8 million tonnes, well below June’s four-month high of around 5.2 million tonnes which had been largely due to cargoes spilling over from May, assessments by Thomson Reuters Oil Research last week showed. – Industry sources said that fewer loadings from the Caribbean as well as the Middle East would add to tighter fuel oil markets in the next month or two.

MEXICO EXPORTS – Mexican refinery yields of residual fuel oil have eased from a January high of over 30 percent to some 27.7 percent in May, JBC Energy said on Tuesday. – “With demand still strong, this has started to squeeze exports compared to earlier in the year, a trend we would assume will persist should yields continue to fall,” JBC said adding this would further underpin an already tight Latin American market. – Separately, industry sources said the recent outage at Mexico’s Salina Cruz refinery would reduce fuel oil exports to Asia, adding to seasonally lower supplies of the fuel which have already helped boost the fuel oil market. – In 2016, Mexico accounted for 4 percent of the 72 million tonnes of fuel oil imported into Singapore, Reuters calculations based on official figures showed. – By comparison, of the 39 million tonnes of fuel oil imported into Singapore so far in 2017, only 2 percent originated from Mexico. – Mexican state oil producer Pemex said it expects to restart operations on July 30 at Salina Cruz after it was hit by flooding and subsequent fire on June 14 that forced a shutdown of the plant.

WINDOW TRADES – Five cargo trades were reported in the Platts window, totalling 120,000 tonnes of 380-cst fuel oil. – A total of 1.24 million tonnes of fuel oil have traded in the window since the start of June, against 1.94 million tonnes in May. – Please click on for more details.

TENDERS – Venezuela’s state-run oil firm PDVSA is expected to award this week seven tenders launched earlier this month to buy up to 15.32 million barrels of oil products including 3-7 cargoes of vacuum gasoil each totalling 500,000 barrels for delivery in the second half of the year. – This is Latin America’s second largest tender to import fuels following Costa Rica’s annual offer to import products for domestic consumption.

ASSESSMENTS FUEL OIL CASH ($/T) ASIA CLOSE Change % Change Prev

RIC Close Cargo – 180cst 291.40 5.30 1.85 286.10 Diff – 180cst 1.95 0.10 5.41 1.85

Cargo – 380cst 285.14 4.81 1.72 280.33 Diff – 380cst 2.11 0.18 9.33 1.93

Bunker (Ex-wharf)- 380cst 290.25 5.50 1.93 284.75 Bunker (Ex-wharf)

Premium 5.11 0.69 15.61 4.42

Source: Reuters

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