RTRS:Asia Fuel Oil-March/April falls below $5/T, 2nd time in a week
(Reuters' expanded Asia Oil Swaps Forward Curve coverage includes the East-West component. For
more information: )
SINGAPORE, Feb 24 (Reuters) - The Asia fuel oil market weakened on Friday, giving up
most of its gains from the past two sessions as its front-month timespread fell below $5.00 a
tonne in backwardation for a second time in a week.
Traders said the market was uncertain over near term direction, amid spiralling fixed-price
levels that has led to demand destruction among buyers, from Chinese teapot refiners seeking
straight-run fuel oil to shippers that need to purchase bunker fuel for their vessels.
The cash price for the benchmark 180-centistoke (cst) grade hit a third consecutive
more-than three-year high of $750.25 a tonne, lifted by soaring global crude benchmarks that saw
Brent's front-month April contract breaching a 10-month high of $123.95 a barrel at the Asian
close.
"The market seems torn between the still-strong underlying demand fundamentals and the
demand destruction that has cast such long pall onto the market now," a Singapore-based Western
trader said.
"And there is also Litasco's ongoing bear trading play that is pushing price levels to
weaker extremes. Especially so in a high flat-price environment where other players can afford
to offer their cargoes at lower price levels and still be in the black."
Reflecting the weaker market, the front-month timespread, which has lost nearly 70 percent
of its value since end-January, fell to $4.63 a tonne, down from $5.00 on Thursday, amid thinner
trade volumes of less than 200,000 tonnes.
The trading arm of Russian major LUKOIL continued its selling spree in the thin market where
less than half a million tonnes of prompt timespreads were traded, offloading another 85,000
tonnes of fixed-price March 180-cst and 380-cst contracts.
Litasco, which has sold more than 4.0 million tonnes of swaps since January, also has four
Very Large Crude Carriers (VLCCs) and a 130,000-tonne suezmax, all loading from the
Amsterdam-Rotterdam-Antwerp (ARA) region, arriving in Singapore with 1.2 million tonnes of
on-specification bunkers-grade 380-cst within a short three-week period from March 1.
The Litasco volumes are part of the month's total of more than 5 million tonnes of Western
arbitrage cargoes, record-high levels for the second straight month.
This month's similarly heavy arrivals, which had pushed the market down from four months of
extraordinary strength, has also swelled Singapore stock levels soared to a 40-week high of 21.7
million barrels (3.3 million tonnes.
Traders, however, remained confident that the market's downside will be limited by lower
inflows for April and continued firm demand from Japan for low-sulphur barrels for
power-generation, amid a harsh winter and loss nuclear capacity, have also kept sentiment up.
April-arrival Western arbitrage volumes are notionally at 2.6-2.7 million tonnes so far,
amid slower tanker-fixing activity, with no new bookings seen on Friday.
(Table of Western arbitrage fixtures: )
SWAPS SPREADS: March/April fell 63 cents to a backwardation of $4.63 a tonne by the Asian
close at 0830 GMT, with 180,000 tonnes traded at $4.10-$5.00 a tonne, down from 210,000 tonnes
previously. Bids/offers were last seen at $4.50/$4.75 by 1130 GMT.
At least 85,000 tonnes of April/May were transacted at $4.75-$5.25, 30,000 tonnes of
May/June at $5.75, 45,000 tonnes of Q2/Q3 at $16.50-$16.75, and 30,000 tonnes of Q3/Q4 were done
at $14.50 a tonne.
At least 10,000 tonnes of March/April 380-cst was transacted at $4.50-$5.00, while 20,000
tonnes of March viscosity were traded at $11.50 a tonne.
SWAPS OUTRIGHTS: The March and April 180-cst swaps were valued at $744.50 and $739.88 a
tonne respectively, up $5.75-$6.38 or 0.8-0.9 percent.
At least 50,000 tonnes of March were traded at $743.25-$745.50, down from 85,000 tonnes
previously, with offers last seen at $744.50 by 1130 GMT.
Another 185,000 tonnes of March 380-cst were transacted at $731.50-$733.25 a tonne
For swaps trades, click
EAST-WEST SPREADS: The East-West March and April spreads both widened $1.00 to $41.00 and
$39.25 a tonne respectively. At least 5,000 tonnes of the March contract were traded at $40.00 a
tonne.
SWAPS CRACKS: The March crack widened 87 cents to a discount of $6.46, while April discount
eased 43 cents to $6.17 a barrel, as April Brent gained $1.01 to $123.95 a barrel by the
Asian close.
CARGO PRICES AND DIFFERENTIALS: The 180-cst grade rose $5.02 to $750.13 a tonne, while the
380-cst grade was $4.60 higher at $736.80, third-straight highest since July 2008. The
differential for the 180-cst grade eased 30 cents to $6.05, while the 380-cst premium fell to a
fresh five-month low of $4.45, down 80 cents.
TENDERS: India's Essar sold 60,000-80,000 tonnes of 380-cst, for March 15-19 loading from
Vadinar, to BP at a premium of $5.00-$6.00 a tonne to Middle East quotes, on free-on-board (FOB)
basis.
BP bought another 80,000 tonnes of 380-cst from Kuwait Petroleum Corp, for March 9-11
lifting from Kuwait, at a premium of $12.00-$13.00 a tonne to Middle East quotes, FOB.
Taiwan's CPC is seeking 30,000 tonnes of 180-cst and 50,000 tonnes of 380-cst, for April
1-30 delivery, via tender, which closes next Wednesday and will remain valid for two days.
CASH DEALS: Four 380-cst deals.
PetroChina sold two cargoes. A 40,000-tonne cargo was bought by Shell, for lifting on March
21-25, at a premium of $5.00 a tonne to Singapore spot quotes.
Another 20,000 tonnes went to Brightoil, for March 20-24 loading, also at a premium of $5.00
a tonne to Singapore spot quotes.
Hin Leong sold the other two 20,000-tonne cargoes to Shell and BP, both for March 10-14
lifting, at $736.00 a tonne.
BUNKERS: The Singapore bunker differential, the price spread between ex-wharf marine fuel
prices and fuel oil cargo values, lost 60 cents to a premium of $7.20, with bunker prices at
$743.00-$745.00, up $4.00.
