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Asia Fuel Oil-Time spreads narrow on expectations of reduced supply

by June 17, 2016 General


The July-August spreads contract for 380-cst fuel oil narrowed by varying degrees on Friday amid expectations of reduced prompt supplies while the arbitrage window remains shut, traders said.

On the Intercontinental Exchange (ICE), the 380-cst July-August spreads narrowed their discounts by about 40 cents on Friday to about $2.60 a tonne to Singapore quotes, industry sources said.

In the Platts window, aggressive bidding in July swaps narrowed the 380-cst July-August spreads contract from yesterday’s discount of $2.75 to $1.55 a tonne to Singapore quotes on Friday.

In physical markets cash differentials for 380-cst fuel also strengthened, narrowing discounts from Thursday’s minus $3.25 a tonne to minus $2.74 on Friday. FO380-SIN-DIF

“The bullish case here is that supplies in July are expected to thin out because of the closed arbitrage window,” one Singapore-based trader said.

“But on the bearish side, there are others that think there is still an overhang and July (supplies) won’t be as thin.”

Assessments by Thomson Reuters Oil Research and Forecasts show that total fuel oil flows into East Asia for June are expected to close at a 34-month low below 5 million tonnes for the first time since September 2013 after arrivals from the West and the Middle East dropped further from the previous month.

– Oil refineries worldwide are looking to decrease gasoline yields in favour of distillates as high global stocks of the motor fuel weigh on profit margins.

– Global oil majors Chevron and Royal Dutch Shell are putting small refineries up for auction as they look to trim lower-margin assets in the face of rising crude oil prices.

– A Venezuelan businessman pleaded guilty on Thursday to charges stemming from what the U.S. Justice Department called a large, ongoing investigation into bribery at Venezuela’s state oil company.

SINGAPORE CASH DEALS – One cash deal reported. For further details, please see

 FUEL OIL                                                                                           
 CASH ($/T)                 ASIA CLOSE         Change     % Change     Prev Close   RIC
 Cargo - 180cst                        229.55      -0.26        -0.11       229.81  FO180-SIN
 Diff - 180cst                          -3.22       0.23        -6.67        -3.45  FO180-SIN-DIF
 Cargo - 380cst                        225.11      -0.27        -0.12       225.38  FO380-SIN
 Diff - 380cst                          -2.74       0.51       -15.69        -3.25  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst             225.61       0.03         0.01       225.58  BK380-B-SIN
 Bunker (Ex-wharf) Premium               0.50       0.30       150.00         0.20

Source: Reuters (Reporting by Roslan Khasawneh; Editing by David Goodman)