SINGAPORE, Sept 12 (Reuters) - Asia's fuel oil market held steady at firmer levels on
Monday, with its prompt timespreads holding at around $3.50-$4.50 a tonne levels, on the back of
strengthening over the past four sessions, but buying interests were thin.
Its front cracks were firm at discounts narrower than $5.00 a barrel for a second straight
session, supported by stronger buying interests in the fixed-price market, largely due to lower
crude benchmarks.
"The lack of volume in the timespreads, especially October/November, would suggest that it
may well have reached its short-term peak and we are due for a downward correction," a
Singapore-based Western trader said.
"Given where October fundamentals are, I would say that both the downside and upside risks
are limited, and that it would very much be rangebound around current levels, unless someone
comes in with a major trading play next month."
Less than 50,000 tonnes of October/November were traded on Monday, well below last week's
daily average of more than 100,000 tonnes, at a backwardation of $4.00 a tonne, down 25 cents
and slipping for the first time in a week.
In contrast, buying interests in the October contract remained strong, with more than
100,000 tonnes traded and keeping its cracks at discounts narrower than $6.00 a barrel, as
Brent crude's October contract LCOc1 fell by a massive $3.49 to $110.90 a barrel at the Asian
close.
The October market is expected to be weaker than this month, mainly due to heavier Western
arbitrage inflows, with 3.5-3.6 million tonnes booked so far, on track to be the heaviest since
March, and with over two weeks of the tanker fixing window left open.
However, no new bookings for October arrival were seen for a fifth consecutive session on
Monday, as the West-to-East arbitrage window remained shut, as it has been for more than a week,
while November-arrival volumes remain at around 1 million tonnes booked so far.
(For full list of fixtures, click on O/FUELARB)
The market's downside, however, is limited by a lack of on-specification cargoes, mainly for
the bunkers market, among the heavy October volumes, largely high-density, high-viscosity
barrels from the Caribbean.
However, heavier low-density exports from Iran, for October-loading, are expected to
increase the supplies of blendstocks, allowing more on-specification volumes into the market,
traders said.
That has resulted in a narrower viscosity spread, with its October contract at below $9.00 a
tonne for a second session, after surging to nearly $11.00 at the start of the month.
SWAPS SPREADS: September/October inched up 13 cents to a backwardation of $4.63 a tonne by
the Asian close at 0830 GMT, with last bid/offered seen at $4.25/$4.75 by 1130 GMT.
A mere 30,000 tonnes of October/November were transacted at $4.00 a tonne, down from a
massive 270,000 tonnes previously, with bids/offers last seen at $3.85-$4.00, while 30,000
tonnes of December/January were done at $2.40-$2.75.
Two 15,000-tonne lots of Q1/Q2 spread were traded at $7.25-$7.50 a tonne, while 10,000
tonnes of the October viscosity spread were traded at $8.75-$9.00.
SWAPS OUTRIGHTS: The September and October 180-cst swaps were valued at $648.50 and $643.88
a tonne, respectively, down $24.13-$24.25, or 3.6 percent, for both, with 10,000 tonnes of
September traded at $648.50-$648.75 a tonne.
At least 155,000 tonnes of October were transacted at $642.00-$644.50 a tonne, up from
135,000 tonnes in the previous session, with last bid at $643.25 by 1130 GMT, while 5,000 tonnes
of the September 380-cst contract was traded at $640.75 and 25,000 tonnes of October at
$634.75-$635.50.
For swaps trades, click
EAST-WEST SPREADS: The East-West September spread climbed 75 cents to $28.75 a tonne, while
the October contract was unchanged at $28.75, with no trades seen.
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Fuel oil East-West forward curve: here
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SWAPS CRACKS: The October crack discount narrowed 58 cents to $5.35, while November
strengthened 70 cents to a discount of $5.52 a barrel to Dubai crude, respectively.
CARGO PRICES AND DIFFERENTIALS: The 180-cst grade plunged $25.05 to $649.95 a tonne, while
the 380-cst grade was $24.58 lower at $640.80. The differential for the 180-cst grade dipped 38
cents to a premium of $4.00 a tonne though, while the 380-cst differential was unchanged at a
premium of $3.75.
TENDERS: India's Hindustan Petroleum Corp (HPCL) is offering three cargoes, totalling up to
90,000 tonnes, of 380-cst, for end-September to early-October loading, via tender, which closes
on Sept. 12 and Sept. 13, with one-day validity. Two parcels, of up to 30,000 tonnes each, are
for loading on Sept. 21-25 and Oct. 6-10 from Mumbai, while the remaining lot is for Sept. 23-25
loading from Visakhapatnam.
CASH DEALS: One deal - Vitol bought 20,000 tonnes of 180-cst grade for Oct. 2-6 loading
from PetroChina at a premium of $4.00 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, gained $1.57 to a premium of $6.20, with bunker prices
$646.00-$648.00, down $23.00.
