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Asia Fuel Oil-Arbitrage spreads at near 2-month high on rising tanker rates

by April 21, 2017 General

Rising dirty tanker freight rates lifted the front month East-West (EW) arbitrage spreads to a near two-month despite falling fuel oil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) oil hub and ample Singapore stocks.


Fuel oil stocks in independently held storage in the ARA hub slipped by 2 percent, or 25,000 tonnes, to a total of 1.087 million tonnes in the week to April 20, data from Dutch consultancy PJK International showed.

Fuel oil was the only petroleum product to show a fall in stock levels driven by a rise in exports to Singapore.

A fuel oil laden Suezmax left for Singapore on April 16 while a VLCC arrived on April 14 and is currently loading cargoes of the fuel, according to PJK data.

ARA stocks have continued to ease from their March 30 record high of 1.545 million tonnes, but are in line with the 1.084 million tonnes of inventories seen during the same time last year.


EW arbitrage spreads rose to a near two-month high despite ample fuel oil inventories in Singapore and shrinking ARA stocks.

Traders said the rise in EW spreads had less to do with demand for arbitrage cargoes and more to do with firmer dirty tanker rates.

“Recent days have seen some green shoots in the dirty freight market, with assessments pulling away from the multi-month lows seen at the end of Q1,” said JBC Energy on Friday.

JBC attributed the stronger rates to seasonally higher refinery crude demand as well as increased shipping activity from West Africa and the Middle East.

The May arbitrage spreads – the price difference between FOB Singapore 180-cst high-sulphur fuel oil and FOB Rotterdam barge fuel oil with maximum 3.5 percent sulphur – rose to its highest since Feb. 28 at $25 a tonne, up $1 a tonne from the previous session.


Nine cargo trades were reported in the Platts window on Friday totalling 160,000 tonnes of 380-cst fuel oil along with an additional 80,000 tonnes of 180-cst fuel oil.

380-cst fuel oil cash premiums FO380-SIN-DIF were assessed 4 cents a tonne lower from the previous session at $1.22 cents a tonne above Singapore quotes.

A total of 3.02 million tonnes of 380-cst fuel oil have traded in the window since the start of April.

Taiwan’s Formosa sold 40,000 tonnes of 380-cst HSFO with a maximum sulphur content of 4 percent for May 3-5 loading at the port of Mailiao to Simosa at a $6.50 discount to Singapore 180-cst HSFO quotes.

 FUEL OIL                                                                                       
 CASH ($/T)                  ASIA CLOSE        Change    % Change    Prev Close  RIC
 Cargo - 180cst                        309.20     -1.55       -0.50      310.75  FO180-SIN
 Diff - 180cst                           2.10      0.20       10.53        1.90  FO180-SIN-DIF
 Cargo - 380cst                        300.19     -1.83       -0.61      302.02  FO380-SIN
 Diff - 380cst                           1.22     -0.04       -3.17        1.26  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst             302.50     -1.50       -0.49      304.00  BK380-B-SIN
 Bunker (Ex-wharf) Premium               2.31      0.33       16.67        1.98

Source: Reuters (Editing by David Evans)