WSJ:Indian Fuel Oil Sales Point to a Rally Ahead in Asia
By GURDEEP SINGH
SINGAPORE -- Fuel oil sales deals struck by Indian refiners over the last couple of days suggest the regional market is heading for a strong rally, as traders in the Singapore market may take cues from Indian cargo premiums.
India's Mangalore Refinery and Petrochemicals Ltd. and Indian Oil Corp. both sold fuel oil at sharply higher spot differentials, surprising traders in a market that appeared to be tightly balanced for October.
"It is huge," a regional fuel oil trader said, referring to the premium of an MRPL fuel oil sale to Japan's Mitsui. "The market looks super tight." Traders suggested that it was too high a premium level in the current market and said they would closely watch the next few deals to see if the trend continues.
Mitsui has bought an October-loading fuel oil parcel from MRPL at an exceptionally high premium of around $7.25 a ton to Singapore quotes, FOB, New Mangalore for an 80,000-ton parcel loading Oct. 19-21. People familiar with the matter said it was the highest premium for the MRPL cargo in at least two years.
It would be the highest price for the MRPL cargo since the company started offering the 380-cst HSFO grade with 4% sulfur instead of the usual 3.5% sulfur, which was valued more because it could be sold directly in the Singapore pricing window.
Interest in the MRPL cargo was strong this time due to firm regional fundamentals, with most bids under $4/ton above Singapore and the Mitsui bid was by far the highest. MRPL last sold a similar parcel at a premium of less than $2.50 ton to Singapore quotes.
Meanwhile, discount levels for IOC's regular fuel oil parcel from Chennai fell by nearly half for a mid-October loading cargo.
The sharply higher spot differentials will likely prompt refiners to sell more fuel oil in the market to take advantage of soaring prices. Just hours after it sold the October parcel to Mitsui, MRPL issued another tender to export a similar parcel for early November.
The tender for the Nov. 3-5 loading cargo closes Sept. 27.
Sentiment received a further boost from a drop of nearly 2.50 million barrels in Singapore's fuel oil inventories over the past week. Singapore 180-cst premiums have strengthened to just under minus $5 a barrel to Dubai crude.
