RTRS: Asia Fuel Oil-Volatile, low fixed-price draws heavy hedging volumes
(For the 12-month forward curve, click )
SINGAPORE, Aug 10 (Reuters) - Asian fuel oil held firm on Wednesday, with massive volumes
traded in the soon-to-be front-month September contract and the prompt quarterly timespreads,
driven by heavy end-user hedging and speculative trading amid a volatile fixed-price environment
in the past 48 hours.
More than half a million tonnes of the Q4/Q1 timespread were traded, although price levels
remained steady, while another 300,000 tonnes of September were transacted, driven mostly by
short-term speculators.
"Flat-price has been swinging like a yoyo. During the pricing period, crude was running down
and there was quick of bit of panic selling that ended up weakening the cracks, despite lower
Brent, and only to have crude rebound after that," a Singapore-based Western trader said.
"At the same time, there were a lot of end-user hedging today, especially by shippers, as
crude was running back up after falling below $100 on Tuesday. And that has translated into the
heavy Q4/Q1 volumes, with the banks throwing it back into the market."
Brent crude's September contract LCOc1 was at $105.34 a barrel at the Asian close, down
$1.57, but rebounded to $106.11 by 1225 GMT, while the selling pressure pushed fuel oil's cracks
down 23 cents although it still held at a discount narrower than $5.00 a barrel to Dubai.
Traders said fuel oil remains fundamentally strong, up till first-half September at least,
on tight inflows from both the West and the Middle East.
Inflows from Iran has been well below-average levels, with less than 300,000 tonnes arriving
in East Asia for August and September, due to disruptions to its domestic natural gas supplies
that resulted from maintenance at its South Pars gas field, which is expected to last till end
September or early October. ,
Western arbitrage inflows were at below-average volumes for a third straight month, closing
at 3.0-3.1 million tonnes, while September volumes were at 2.3-2.4 million tonnes booked, with
no fresh bookings seen on Wednesday.
(For full list of fixtures, click on )
The tight market has drawn more offers from suppliers, particularly Middle East sellers who
have offered three cargoes, totalling 350,000-400,000 tonnes, for loading between second-half
August and early September.
* SWAPS SPREADS: August/September eased to a backwardation of $3.75 a tonne by the Asian
close at 0830 GMT, down 50 cents from the previous close, on thin volumes for a fifth straight
session as the contract nears expiry, with 5,000 tonnes traded at $4.50.
Trading interests down the curve stayed moderate, with 60,000 tonnes of September/October
traded at $2.75-$3.00 a tonne, up from 30,000 tonnes, and last bid/offered higher at $3.00/$3.15
after by 1130 GMT.
Another 40,000 tonnes of October/November were transacted lower at $1.65-$2.00, up from
15,000 tonnes, while a massive 555,000 tonnes of Q4/Q1 were traded at $3.25-$3.50, soaring from
just 30,000 tonnes, 45,000 tonnes of Q1/Q2 at $3.00 and 15,000 tonnes of Q2/Q3 at $2.25.
The 380-cst market was also more active, with 65,000 tonnes of its September viscosity
spread traded at $7.50-$7.75, 35,000 tonnes of October at $9.00-$9.25, 10,000 tonnes of August
at $5.00-$5.50 and 5,000 tonnes of its August/September spread at a contango of $2.00.
SWAPS OUTRIGHTS: The August and September 180-cst swaps were valued at $624.63 and $620.88 a
tonne, down $13.00-$13.50, or 2.0-2.1 percent for both, with at least 20,000 tonnes of August
traded at $624.50-$624.75, down from 35,000 tonnes.
A massive 280,000 tonnes of September were transacted at $620.75-$626.00, surging from
80,000 tonnes, and last offered at $626.00 by 1130 GMT, in line with higher crude benchmarks.
Activity in the 380-cst market plummeted, with only 5,000 tonnes of September traded at
$613.25.
For swaps trades, click
* EAST-WEST SPREADS: The East-West spreads was steady to stronger, with its August contract
rising by $1.25 to $25.25 while September was unchanged at $29.00 a tonne, with 20,000 tonnes of
September traded at the same price level and another 5,000 tonnes of October at $30.00.
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Fuel oil East-West forward curve: here
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* SWAPS CRACKS: The September crack stayed firm at a discount of $4.77 a barrel to Dubai
crude, slipping by 23 cents and steady to the previous two sessions' month-high levels, while
October dipped 11 cents to a discount of $5.43.
* CARGO PRICES AND DIFFERENTIALS: The 180-cst grade fell for a fourth time in five sessions
to $626.00 a tonne, down $13.75, while the 380-cst grade plunged $13.18 to $619.38. The
differential for the 180-cst grade slipped to a premium of $3.13, down 25 cents, while that for
the 380-cst grade inched up 25 cents to $3.38.
* TENDERS: Kuwait Petroleum Corp (KPC) is expected to sell 80,000 tonnes of 380-cst, for
Aug. 14-15 lifting on a free-on-board (FOB) basis, Bakri at premiums substantially higher than
its last deal, which was done at a premium of $10.00-$11.00 a tonne to Middle East spot quotes,
FOB.
Saudi Aramco offered up to 90,000 tonnes of 380-cst, for Aug. 31-Sept 2 loading from its
joint-venture Sasref refinery in Jubail, FOB, and offers are expected by late Wednesday, while
ExxonMobil has offered a similar volume of 700-cst, for Sept. 2-4 lifting from the another
joint-venture refinery, Samref, in Yanbu, FOB, with offers expected by Thursday and a deal a day
later.
* CASH DEALS: Two deals -- PetroChina sold 20,000 tonnes of 380-cst, for Sept. 5-9 loading,
to Hin Leong at $619.50 a tonne, equivalent to a premium of $4.56 a tonne to Singapore spot
quotes.
Westport sold another 20,000 tonnes of 380-cst, for Aug. 30-Sept. 2 lifting, to Shell at a
premium of $2.75 a tonne to spot quotes.
* BUNKERS: The Singapore bunker differential, the price spread between ex-wharf marine fuel
prices and fuel oil cargo values, remained wide at a premium of $10.63, down 83 cents from the
previous session, with bunker fuel prices lower at $630.00 a tonne, down $14.00.
