SINGAPORE, Sept 2 (Reuters) - Asia's fuel oil market weakened further on Friday, as its
expiring September/October timespread fell sharply for a second straight session, while its
prompt cracks dropped to a discount wider than $7.00 a barrel to Dubai, despite lower crude
benchmarks.
Like the previous session, the timespreads further down its forward curve were largely
steady, however, hovering between a 25 cent drop and a 25 cent hike, as players sold down the
front-end for a third consecutive session, largely on profit-taking.
"It's the same story all week. Players have been taking profit on the September flat price,
and that's pushing September/October down, with not much liquidity in the timespread itself," a
Singapore-based Asian trader said.
"At the same time, October/November is relatively steady. It is fundamentally weaker than
this month, due to heavier supplies, but the downside is limited by a lack of on-spec cargoes,
and that has led to a wider viscosity spread and a narrower East-West."
Brent crude's September contract LCOc1 was at $113.88 a barrel at the Asian close, down 42
cents, but fuel oil's October crack weakened further to a discount wider than $7.00 a barrel to
Dubai crude, its lowest in about a month.
The October East-West spread, which had held above $30 a tonne for over two weeks, continued
to fall and was valued at $27.75 by the Asian close, down by more than $2 in the past two
sessions, amid heavier-than-usual activity for a third session.
Similarly, its viscosity spread for the same contract month stayed wide at above $10.00 a
tonne, rising from around $7.00 just a week ago, reflecting the month's changing fundamentals,
where there is less quality balance between high-viscosity, high-density cargoes and
on-specification parcels.
Western arrivals for October rose to 3.5-3.6 million tonnes booked so far, on track to close
at the highest volume since March, with more than two weeks of the tanker-fixing window left
open, but on the back of this moth's 32-month low arrivals.
A new booking was seen -- Kazakhstan's KMG provisionally chartered the 100,000-tonne Album
for Sept. 10 loading from Sillamae in the Baltics, but tanker-fixing activity has slowed down
since the end of last week, curtailed by a narrowing West-to-East arbitrage window. (For full
list of fixtures, click on O/FUELARB)
SWAPS SPREADS: September/October weakened further to a backwardation of $3.75 a tonne by the
Asian close at 0830 GMT, with a mere 10,000 tonnes traded at $4.50, down from 75,000 tonnes in
the previous session, and last bid/offered at $4.25/$5.15 by 1130 GMT.
At least 105,000 tonnes of October/November transacted at $3.15-$3.50 a tonne, up from
75,000 tonnes previously, 30,000 tonnes of November/December at $2.50, 25,000 tonnes of
December/January at $1.75, 55,000 tonnes of January/February at $1.75 and 10,000 tonnes each of
February/March and March/April both at $1.75.
The Q4/Q1 spread was traded at $6.75 a tonne for 30,000 tonnes and 15,000 tonnes of Q2/Q3 at
$4.75.
At least 15,000 tonnes of September viscosity were transacted at $9.00-$9.25 a tonne, 40,000
tonnes of October at $9.65-$10.00 and 10,000 tonnes of November at $10.25. One lot of 15,000
tonnes of Q4 viscosity spread were done at $10.00, while its October/November contract was
traded at minus 50 cents a tonne for 10,000 tonnes.
SWAPS OUTRIGHTS: The September and October 180-cst swaps were valued at $664.88 and $661.13
a tonne, down $3.75-$4.50 or 0.5-0.7 percent, with 50,000 tonnes of September traded at
$664.75-$665.00, doubling from the previous trading session, by the Asian close.
October volumes rose to 65,000 tonnes from 35,000 tonnes, and were transacted at
$661.00-$662.00 a tonne, while 5,000 tonnes of September 380-cst contract were traded at $656.00
and 20,000 tonnes of October at $650.25-$650.75.
For swaps trades, click
EAST-WEST SPREADS: The East-West spreads narrowed to under $28.00 a tonne, with both
September and October contracts down 50 cents to $27.25 and $27.75 a tonne, respectively. At
least 20,000 tonnes of October were traded, with the last deal done at $27.50 by 1030 GMT, and
5,000 tonnes of November at $28.75.
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Fuel oil East-West forward curve: here
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SWAPS CRACKS: The October crack widened 24 cents to a discount of $7.11 a barrel to Dubai
crude, while November weakened by 20 cents to a discount of $7.34.
CARGO PRICES AND DIFFERENTIALS: The 180-cst grade fell $4.65 to $668.55 a tonne, while the
380-cst grade was $4.60 lower at $658.55. The differentials for the 180-cst and 380-cst grades
were both down 25 cents at a premium of $4.75 and $4.05 a tonne respectively.
TENDERS: India's Mangalore Refinery & Petrochemical Ltd (MRPL) sold 80,000 tonnes of 380-cst
fuel oil for Oct. 5-7 loading from New Mangalore to oil major BP at a premium of $2.00-$2.50 a
tonne to Singapore spot quotes on free-on-board basis (FOB).
CASH DEALS: Three deals - Shell bought 20,000 tonnes of 380-cst grade for Sept. 28-Oct. 2
loading from Vitol at a premium of $3.50 a tonne to Singapore spot quotes.
Hin Leong bought two lots of 20,000 tonnes of 380-cst fuel oil each for Sept. 28-Oct. 2
loading from Vitol at a premium of $3.50 a tonne to Singapore spot quotes.
BUNKERS: The Singapore bunker differential, the price spread between ex-wharf marine fuel
prices and fuel oil cargo values, edged up 60 cents to a premium of $4.45, with bunker prices
$662.00-$664.00, down $4.00.
