Asia Fuel Oil-Time spreads narrow on expectations of reduced supply
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 $2.74 on Friday. FO380-SIN-DIF
“The bullish case here is that supplies in July are expected to thin out because of the closed arbitrage window,” one Singapore-based trader said.
“But on the bearish side, there are others that think there is still an overhang and July (supplies) won’t be as thin.”
Assessments by Thomson Reuters Oil Research and Forecasts show that total fuel oil flows into East Asia for June are expected to close at a 34-month low below 5 million tonnes for the first time since September 2013 after arrivals from the West and the Middle East dropped further from the previous month.
– Oil refineries worldwide are looking to decrease gasoline yields in favour of distillates as high global stocks of the motor fuel weigh on profit margins.
– Global oil majors Chevron and Royal Dutch Shell are putting small refineries up for auction as they look to trim lower-margin assets in the face of rising crude oil prices.
– A Venezuelan businessman pleaded guilty on Thursday to charges stemming from what the U.S. Justice Department called a large, ongoing investigation into bribery at Venezuela’s state oil company.
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FUEL OIL CASH ($/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)