RTRS: Asia Fuel Oil-Selling pressure ease, Brightoil trims volumes
(For the 12-month forward curve, click )
SINGAPORE, July 5 (Reuters) - The Asian fuel oil market fell further on Tuesday, with prompt
spreads easing for a second session while cracks stayed at weakened levels from the previous
session.
Traders said selling pressure has eased, with lower volumes traded, and particularly from
China's Brightoil, which did not sell any physical cargoes and only sold small volumes of
front-month, fixed-price swaps, after offloading large volumes of both physical lots and July
paper in the past two sessions.
"They didn't sell any physical cargoes today, after players reduced their bid levels and
just held their offers at $4.00-premium levels. The lack of aggression could perhaps suggest
that Brightoil is not on a bear play after all," said a Singapore-based Asian fuel oil trader.
"They could just well be clearing their front-end cargoes, given how much volumes of 180-cst
they bought the last time, and demand for 180-cst, especially as cutters, hasn't been great, due
to the heavy volumes on-spec 380-cst in the market last month."
Brightoil sold 30,000 tonnes of July swaps, on the back of selling six physical cargoes,
totalling 178,000 tonnes, and 170,000 tonnes of paper contracts in the past two sessions.
Traders also pointed out the market's supply-demand fundamentals for July is stronger than
last month, and that it is unlikely that Brightoil would mount a bear play against that.
The swing factor in July's favour is lower arrival volumes of Iranian cargoes, estimated at
750,000-800,000 tonnes, down from June's record-high of 1.2 million tonnes, while Western
supplies remain at below-average levels for a second straight month, at 2.9-3.0 million tonnes.
In contrast, demand remained stronger-than-normal, from unexpected sources, such as
Bangladesh and Malaysia.
However, August's notional supplies rose, with a second Very Large Crude Carrier (VLCC) from
Europe seen booked in two days, taking the month's total to 2.8-2.9 million tonnes so far. The
Lucky Trader was provisionally chartered by Russia's Gunvor for July 10 lifting from Rotterdam
and delivery to Singapore.
Brent crude's August contract LCOc1 was at $111.10 a barrel by the Asian close, down 50
cents.
* SWAPS SPREADS: July/August eased for a fourth straight session to a backwardation of $3.25
a tonne, down 50 cents, by the Asian close at 0830 GMT, with 10,000 tonnes traded at $3.00, down
from 15,000 tonnes.
August/September was also lower at $2.75 a tonne, down 38 cents, with 95,000 tonnes traded
at $2.75-$3.00, and last bid/offered at $2.75/$3.25 after the close by 1130 GMT, another 70,000
tonnes of September/October at $1.85-$2.00, 5,000 tonnes each of October/November and
November/December at $1.75 and $1.50 respectively, as well as 40,000 tonnes of December/January
at 50 cents.
Activity in the 380-cst market picked up, with 100,000 tonnes of July traded at $5.50-$5.75
a tonne, while 15,000 tonnes of the July viscosity spread traded at $6.75-$7.25, 30,000 tonnes
of August at $9.75-$10.00, 20,000 tonnes of September at $10.75-$11.00 and 15,000 tonnes of Q4
at $12.50.
* SWAPS OUTRIGHTS: The July and August 180 cst swaps were valued at $642.88 and $639.63 a
tonne, down $5.00-$5.50, or 0.8-0.9 percent, with 45,000 tonnes of July traded at
$642.50-$643.00, similar to a day ago, after the close.
Another 85,000 tonnes of August were transacted at $639.75-$641.25, and last bid/offered at
$643.50/$645.50, down from 100,000 tonnes, while a massive 110,000 tonnes of July 380 cst were
traded at $634.50-$635.25 a tonne.
* EAST-WEST SPREADS: The East-West spreads weakened for a fourth straight session, with July
and August valued at $32.00 and $34.00 a tonne respectively, down $1.00 and 25 cents, with no
trades seen.
* SWAPS CRACKS: The August crack was stable at weaker levels, on the back of a more than
$1.00 fall on Monday, and was valued at a discount of $6.83 a barrel to Dubai crude, up a slight
15 cents, while its September contract gained 24 cents to a discount of $7.50.
* CARGO PRICES AND DIFFERENTIALS: The 180-cst grade fell for a second consecutive session to
$645.40 a tonne, down $5.65, while the 380 cst grade lost $5.78 to $639.60. The differential for
the 180-cst grade dropped to $3.63, down another 13 cents and falling for a fourth session, but
that for the 380 cst grade inched up by 20 cents to $6.30.
* TENDERS: No tenders seen.
* CASH DEALS: No deals
* BUNKERS: The Singapore bunker differential, the price spread between ex-wharf marine fuel
prices and fuel oil cargo values, rebounded to a premium of $9.40, up 78 cents and rising for
the first time in five sessions, with bunker fuel prices down $5.00 at $649.00 a tonne.
