15-06-2016

Asia Fuel Oil-380-cst prompt spreads slip erasing last weeks gains

asiafuel

The prompt month time spreads of the 380-cst fuel oil slipped, erasing last weeks gains as selling pressure mounted on Tuesday, but participants remained optimistic amid expectations of narrowing supplies over the next month.

The June-July spreads contract of the 380-cst fuel widened its contango structure to $4 a tonne to Singapore quotes, 50 cents lower from the previous day. Last week, the same contract was trading as low as minus $5.25 a tonne but eventually narrowed its contango to minus $3.50 a tonne to Singapore quotes by Friday.

Similarly, the 380-cst July-August spreads contract also widened its contango by 75 cents on Tuesday to minus $3 a tonne to Singapore quotes. Fuelled by expectations of tighter supplies amid a shut arbitrage window, the July-August contract last week narrowed its discounts by as much as $1 to minus $2.25 a tonne to Singapore quotes.

“Sentiment for July is generally better since the expectation is supplies will be tighter and excess inventories can be cleared,” said one Singapore-based trader.

Western arrivals of fuel oil into East Asia for July are expected to stay thin for a third month running at well-below the 12-month running average of 4.4 million tonnes and steady to June’s revised total of 3.3 to 3.4 million tonnes, according to assessments by Thomson Reuters Oil Research and Forecasts.

In the bunker fuels market, ex-wharf premiums of the 380-cst fuel oil were lower at 30 cents a tonne above Singapore quotes. Ex-wharf cash deals on Tuesday for the 380-cst fuel were said by traders to have been done at between $229 and $230 a tonne.

Meanwhile, sales volumes of Singapore marine fuels in May surged to a record 4.364 million tonnes, according to official data, as vessels refuelling at the world’s busiest bunkering port sought to take on more fuels in anticipation of rising prices, traders said.

Throughout May, ex-wharf differentials averaged 55 cents a tonne below Singapore quotes as selling pressure from suppliers seeking to clear cargoes saw discounts for the bunker fuel widen as low as minus $3 a tonne, particularly in the second half of the month.

MARKET NEWS:
– The oil market is now in balance thanks to unplanned outages and robust demand, particularly from emerging economies, but this equilibrium will tilt into surplus again early next year, the International Energy Agency said on Tuesday.

– Iran’s oil exports are on track to hit the highest in almost 4 1/2 years in June, as shipments to Europe recover to near pre-sanctions level, according to a source with knowledge of the country’s crude lifting plans.

SINGAPORE CASH DEALS – Two cash deals reported. For further details, please see

 FUEL OIL                                                                                
 CASH ($/T)                 ASIA CLOSE       Change   % Change  Prev      RIC
                                                                Close     
 Cargo - 180cst                      233.27    -5.71     -2.39    238.98  FO180-SIN
 Diff - 180cst                        -2.93    -0.19      6.93     -2.74  FO180-SIN-DIF
 Cargo - 380cst                      229.36    -6.18     -2.62    235.54  FO380-SIN
 Diff - 380cst                        -3.19    -0.29     10.00     -2.90  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst           229.66    -6.88     -2.91    236.54  BK380-B-SIN
 Bunker (Ex-wharf) Premium             0.30    -0.70    -70.00      1.00

Source: Reuters

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