Asia Fuel Oil-Front-month spreads widen as arbitrage volumes arrive

In International Shipping News 27/01/2016

Asian fuel oil markets showed signs of weakness on Tuesday as Western arbitrage volumes began to accumulate in Singapore, traders said. Front-month time spreads for 380cst and 180cst fuel oil fell $1 each, settling at a discount of $1.25 per tonne for 380cst and a discount of $1.75 per tonne for 180cst.

“The market is definitely weaker from yesterday,” a Singapore-based trader said.

“Bunker demand helped prop up the market for the past four weeks or so, but now that the arbitrage volumes are starting to come in we’re seeing differentials weaken quite a bit.” Spot differentials for 180cst fuel oil widened their discount by 50 cents from Monday, and settled at a discount of 70 cents per tonne to Singapore quotes.

Spot 380cst fuel oil narrowed its premium to 62 cents per tonne to Singapore quotes, down 47 cents from Monday. In another sign of a weakening market, ex-wharf premiums have been on the decline over the past week, traders said.

Spot premiums for ex-wharf 380cst fuel oil were assessed at $4.46 to spot 380cst Singapore quotes, down 78 cents from the previous day.

Signalling widening supplies, the number of offers for 180cst fuel oil has rebounded in the

Singapore pricing window after weeks of muted activity.

The number of offers for 380cst fuel oil, however, is still relatively low compared to previous

months. Mercuria was the only trader offering 380cst fuel oil cargos in the Singapore pricing window at a premium of $2 to Singapore quotes.

In China, the world’s largest consumer of fuel oil, December imports of the product declined 37 percent from a year earlier to just under 1.2 million tonnes at an average price of $232.37 per tonne, official customs figures showed.

Chinese imports of fuel oil fell 12.9 percent in 2015 from the previous year, while exports rose 11.2 percent. Chinese independent refiners have been switching from fuel oil to crude as a feedstock after the government opened crude imports to buyers outside the state-owned sector in early 2015.

SINGAPORE CASH DEALS – No deals reported.

 FUEL OIL                                                                                               
 CASH ($/T)                    ASIA CLOSE         Change     % Change     Prev Close   RIC
 Cargo - 180cst                           145.47     -12.64        -7.99       158.11  FO180-SIN
 Diff - 180cst                             -0.70      -0.50       250.00        -0.20  FO180-SIN-DIF
 Cargo - 380cst                           142.49     -12.62        -8.14       155.11  FO380-SIN
 Diff - 380cst                              0.62      -0.47       -43.12         1.09  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst                146.95     -13.40        -8.36       160.35  BK380-B-SIN
 Bunker (Ex-wharf) Premium                  4.46      -0.78       -14.89         5.24

Source: Reuters (Reporting by Roslan Khasawneh; Editing by Dale Hudson)