Asia Fuel Oil-Arbitrage window narrows on NWE strength, 380cst discounts widen
The prompt month arbitrage window for Western fuel oil cargoes into East Asia snapped six consecutive sessions of gains on Friday on strength in Rotterdam barge spreads following a drop in fuel oil inventories in North West Europe (NWE),
industry sources said.
The October East-West (EW) spread – the price difference between FOB Singapore 180-cst high-sulphur fuel oil and FOB Rotterdam barge fuel oil with maximum 3.5 percent sulphur – fell $1 on Friday to $25.25 a tonne.
The October EW spread rallied over the past week, settling at a more than six-month high of $26.50 a tonne on Thursday. The last time EW spreads were higher was on April 6 at $28 a tonne.
This came as fuel oil stocks in the Amsterdam-Rotterdam-Antwerp (ARA) oil hub sank to their lowest levels since November 2014, the latest PJK data showed.
ARA fuel oil inventories STK-FO-ARA fell 39 percent, or 325,000 tonnes, from the previous week to 513,000 tonnes in the week to Oct. 13.
This followed a 1.624 million barrel (or about 242,000 tonnes) decline in onshore Singapore fuel oil inventories in the week to Oct. 12 to a total of 23.69 million barrels (or 3.54 million tonnes), official data released on Thursday showed.
In the physical markets, three cash deals were reported in the Platts window after Singapore-trader Hin Leong snapped up two 20,000-tonne cargoes of 380-cst fuel at a discount of 50 cents a tonne to Singapore quotes and another 20,000-tonne cargo of 180-cst fuel oil
at a $2.25 a tonne premium to Singapore quotes, sources said.
All three traded cargoes are due for delivery at the front of today’s trading window between Oct. 29 and Nov. 2.
Hin Leong bought on Thursday a similar 380-cst fuel oil cargo at the front of the window at a premium of about 10 cents a tonne to Singapore quotes, sources said.
The lower deal price weighed down on cash discounts of the 380-cst fuel oil FO380-SIN-DIF which slipped 26 cents from Thursday to 60 cents a tonne below Singapore quotes.
Freight rates for very large crude carriers (VLCCs), which rose to multi-month highs this week, are likely to hold firm as owners tread water before the release of further Middle-East and West Africa cargoes, ship brokers said on Friday.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia rose to around W73.75 on Thursday, the highest since Aug. 9, from W65.75 last week.
That was due to increased chartering activity as a result of more fuel oil heading from Europe to Singapore and China, said Ashok Sharma, managing director of broking house BRS Baxi Far East in Singapore.
– Chinese state-owned chemical companies Sinochem Group and ChemChina are in discussions about a possible merger to create a chemicals, fertiliser and oil giant with almost $100 billion in annual revenue, three sources familiar with the matter said.
– VTTI, the storage arm of the world’s largest independent oil trader Vitol, is scouting for investment opportunities in Southeast Asia to cater to the region’s rising demand for tank space, the head of its Asia business unit said.
SINGAPORE CASH TRADES: Three cash deals reported. For further details, please see
FUEL OIL CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 289.77 6.76 2.39 283.01 FO180-SIN Diff - 180cst 1.53 0.71 86.59 0.82 FO180-SIN-DIF Cargo - 380cst 280.90 5.88 2.14 275.02 FO380-SIN Diff - 380cst -0.60 -0.26 76.47 -0.34 FO380-SIN-DIF Bunker (Ex-wharf)- 380cst 282.00 5.50 1.99 276.50 BK380-B-SIN Bunker (Ex-wharf) Premium 1.10 -0.38 -25.68 1.48
Source: Reuters (Editing by Biju Dwarakanath)