Asia Fuel Oil-Cash discounts widen on renewed selling pressure
Asian cash differentials for benchmark 180-cst and 380-cst fuel oil on Wednesday gave up more of the gains achieved earlier this week in response to renewed selling pressure.
The 380-cst cash differential had a stronger start to the week, rising from minus $4.31 a tonne on Friday to minus $2.90 a tonne on Monday but has since dropped back. “It seems to have backed off a bit,” one Singapore trader said.
“Looks like there is still some sell-side pressure to get rid of excess stocks,” another Singapore trader said.
But traders expect fuel oil markets to rebound in July when signs of tighter supplies are expected to emerge. Western arbitrage supplies into Asia have already been well below average for some months but have failed so far to have a material impact on the market as they have been compensated for by the excess stocks accumulated largely from the March trading play.
For July, Assessments by Thomson Reuters Oil Research and Forecasts show that Western arrivals of fuel oil into East Asia are expected to stay thin for a third month running and well-below the 12-month running average of 4.4 million tonnes.
Three cash deals totalling 100,000 tonnes of 380-cst fuel oil were reported on Wednesday in the Platts window, industry sources said, marking the highest traded volumes since April 23.
Glencore bought one 20,000 tonne cargo from Coastal, while Trafigura and Hin Leong each bought one 40,000 tonne cargo from Mercuria. All of the deals were reported to have been traded at a discount of $3.50 a tonne to Singapore quotes.
TENDERS & AWARDS:
– BP bought 30,000 to 35,000 tonnes of 380-cst high-sulphur fuel oil (HSFO) from the state-owned Indian Oil Corporation (IOC) for delivery at the port of Chennai between July 2 and 4. At $8 a tonne below Singapore quotes, the cargo was said by trade sources to have been sold for a surprisingly low discount.
Gulf Petrochem was recently reported to have purchased a similar cargo from IOC for a discount of about $11 to $13 a tonne to Singapore quotes.
– IOC is offering another 35,000 tonne cargo of HSFO from Chennai for loading between July 10 and 12. The tender closes today and is valid until July 16.
– UAE’s Abu Dhabi National Oil Company is offering a total of 120,000 tonnes of HSFO from Ruwais through two tenders. One 80,000 tonne cargo is scheduled for delivery between July 4 and 10 while the second is due for delivery between July 6 to 8.
– State-owned Taiwanese refiner CPC Corp is expected to start operations at four new units in southern Taiwan by the end of this year, lifting the refinery’s crude processing capacity by 17 percent, the company said on Tuesday.
– Venezuela’s economic crisis is hitting its oil production full on. Output in the country, which has the world’s largest oil reserves, dropped to 2.37 million barrels per day (bpd) in May, according to OPEC data provided by Venezuela.
SINGAPORE CASH DEALS – Three cash deals reported. For further details, please see
FUEL OIL CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 232.73 -0.54 -0.23 233.27 FO180-SIN Diff - 180cst -3.70 -0.77 26.28 -2.93 FO180-SIN-DIF Cargo - 380cst 228.53 -0.83 -0.36 229.36 FO380-SIN Diff - 380cst -3.51 -0.32 10.03 -3.19 FO380-SIN-DIF Bunker (Ex-wharf)- 228.53 -1.13 -0.49 229.66 BK380-B-SIN 380cst Bunker (Ex-wharf) 0.00 -0.30 -100.00 0.30 Premium
Source: Reuters (Reporting by Roslan Khasawneh; Editing by Jane Merriman)