RTRS:Asia Fuel Oil-Thin trade, Oct/Nov weakens further
SINGAPORE, Aug 29 (Reuters) - Asia's fuel oil market eased further on Monday, with strong
selling interest in the soon-to-be-prompt October/November contract, despite thin liquidity due
to the eve of a public holiday in Singapore and a bank holiday in London.
The timespread weakened for a third straight session, closing at a backwardation of $3.38,
down by about dollar since last Wednesday and remains the day's most actively-traded spread
contract since then, with around 100,000 tonnes traded, mainly due to weaker October
fundamentals.
However, the front September/October timespread held firm at month-high backwardation of
around $6.00 a tonne, on comparatively thinner volumes of less than 100,000 tonnes, as it nears
expiry as a pricing tool in aboit two weeks' time, supported by tight supply-demand fundamentals
for a second consecutive month.
"Both months are reflecting their inherent fundamentals quite well, although I would say
that the downside for October is limited because there probably aren't enough on-specification
cargoes coming in," a Singapore-based Asian trader said.
"The October arb flows may well be heavier, but most of them are Caribbean cargoes that are
high-viscosity, high-density and needs to be blended. The market might still be short of on-spec
cargoes."
Western arrivals for October were steady at 3.2-3.3 million tonnes, the highest volume since
May, in with about a month of the tanker-fixing window still open, although no new bookings were
seen on Monday.
Traders said the market remains supported by tight supply-demand fundamentals since the
start of this month and culminating in September, with overall supplies expected to be at the
lowest for the year, with Western arbitrage volumes at below 3 million tonnes.
(For full list of fixtures, click on O/FUELARB)
Brent crude's September contract LCOc1 was at $111.09 a barrel at the Asian close, up 82
cents, while fuel oil's September crack weakened to a discount near $6.00 a barrel to Dubai
crude.
However, the tight fundamentals have kept the market strong, reflected by cash differentials
that continued to hold at firm levels, with that for the 380-cst grade steady at month-high
premiums, of $6.00 a tonne to Singapore spot quotes, for a fourth session.
Singapore inventory levels were steady for a fifth consecutive week at around 20 million
barrels, closing at 20.19 million barrels (3.1 million tonnes) for the week ended Aug. 24, up a
slight 1.6 percent, official data show.
SWAPS SPREADS: September/October was unchanged at a backwardation of $6.00 a tonne by the
Asian close at 0830 GMT, with 65,000 tonnes traded at $5.75-$6.25, up from 40,000 tonnes in the
previous session, and last bid/offered at $6.00/$6.25 by 1130 GMT.
At least 95,000 tonnes of October/November transacted at $3.35-$3.50 a tonne, down from a
massive 395,000 tonnes traded previously.
Another 45,000 tonnes of September/October 380-cst timespreads were traded at $7.45 a tonne,
while 5,000 tonnes of September viscosity were transacted at $8.00.
SWAPS OUTRIGHTS: The September and October 180-cst swaps were valued at $655.88 and $649.88
a tonne, both up $2.50 or 0.4 percent, with at least 150,000 tonnes of September traded at
$655.50-$656.00, down from 165,000 tonnes from the previous trading session, by the Asian close,
and last offered at $655.00 after.
Another 10,000 tonnes of October were transacted at $649.00-$650.00 a tonne, by 0830 GMT,
while 15,000 tonnes of September 380-cst were traded at $648.00.
For swaps trades, click
EAST-WEST SPREADS: The East-West spreads weaken for the third straight session, with its
September contract down 25 cents at $30.25 a tonne, while October fell by the same amount to
$30.00, with no trades seen for the day.
SWAPS CRACKS: The September crack widened 42 cents to a discount of $5.74 a barrel to Dubai
crude, while October weakened by 39 cents to a discount of $6.48.
CARGO PRICES AND DIFFERENTIALS: The 180-cst grade gained $1.92 to $660.55 a tonne, while the
380-cst grade rose to $653.38, up $2.00. The differentials for the 180-cst grade was unchanged
at a premium of $5.75, while the 380-cst grade inched up 38 cents to a premium of $6.88.
TENDERS: Kuwait Petroleum Corp (KPC) sold 80,000 tonnes of 380-centistoke (cst) fuel oil for
Sept. 1-2 loading to an undisclosed buyer at a premium of $23.00-$25.00 a tonne to Middle
Eastern spot quotes on free-on-board (FOB) basis.
Saudi Aramco also sold a 90,000-tonne 380-cst lot for Sept. 22-24 loading from Yanbu to an
undisclosed buyer at a discount of $18.00-$19.00 a tonne to Singapore spot quotes, FOB.
Indian Oil Corp (IOC) sold up to 35,000 tonnes of 380-cst fuel oil for Sept. 17-19 loading
from Chennai to BP at a discount of $8.00-$9.00 a tonne to Singapore spot quotes, FOB. Another
tender for a 35,000-tonne 380-cst lot, to be loaded Sept. 26-28 from Chennai, closes on Sept. 1,
with one-day validity.
The Indian refiner also has a 15,000-tonne 180-cst cargo for Sept. 28-30 loading from Haldia
to be awarded, with the tender closing on Sept 12, with one-day validity.[ FUEL/TENDA]
CASH DEALS: No deals.
BUNKERS: The Singapore bunker differential, the price spread between ex-wharf marine fuel
prices and fuel oil cargo values, rose $2.00 to a premium of $6.63, with bunker prices
$659.00-$661.00, up $4.00.
