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Asia Fuel Oil-Arbitrage spreads climb to six-month high

by October 10, 2016 General

Fuel farm with tanks and pipes.

The front-month East-West (EW) spread rose to its highest in more than six months on Monday, lifted by risng prompt Singapore swap values and steady swap levels for Rotterdam barges, expanding the potential arrivals of Western arbitrage cargoes into East Asia, traders said.

The EW spread for the front month — 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 by $1.25 from the previous session to $24.25 a tonne, extending gains for a third consecutive session.

The last time EW spreads were higher was on April 8 at $24.75 a tonne.

The spreads had held between $21.25 and $23 a tonne since the start of October and had averaged only $19.29 in September.

“While current values are an improvement from September, (EW spreads) will need to see sustained values at or above $23 to $25 a tonne before any real expansion of Western arbitrage volumes moving into East Asia can take place,” Luke Pachymuthu, crude and fuel oil manager at Thomson Reuters Supply Chain and Commodities Research, said in an flows assessment report released on Thursday.

– Korea East-West Power Co (EWP) bought 50,000 tonnes of high-sulphur fuel oil from Mercuria for Oct. 22-24 arrival via a spot tender that closed on Monday, a source from the utility said.


– OPEC officials are embarking on an unusual flurry of meetings in the next six weeks, OPEC sources said on Friday, to nail down details of their Sept. 28 deal to cut production.

– OPEC is back in the business of influencing oil prices as Saudi Arabia works with Russia and Iran to limit output, oil bull Andy Hall said in his latest investor letter, adding that it would take “a brave person” to bet against such an outcome.

SINGAPORE CASH TRADES: Two cash deals reported. For further details, please see

 FUEL OIL                                                                                 
 CASH ($/T)                 ASIA CLOSE      Change   % Change   Prev       RIC
 Cargo - 180cst                     282.45    -5.70      -1.98     288.15  FO180-SIN
 Diff - 180cst                        0.29    -0.08     -21.62       0.37  FO180-SIN-DIF
 Cargo - 380cst                     276.19    -4.91      -1.75     281.10  FO380-SIN
 Diff - 380cst                        0.44     0.22     100.00       0.22  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst          277.69    -6.21      -2.19     283.90  BK380-B-SIN
 Bunker (Ex-wharf) Premium            1.50    -1.30     -46.43       2.80

Source: Reuters (Editing by David Goodman)