Asia Fuel Oil-Rising onshore inventories weigh on time spreads, cracks
Asia’s fuel oil front-month time spreads were under pressure on Thursday as official data showed onshore stocks of Singapore fuel oil rose for a third consecutive week, contradicting expectations of narrowing overall supplies as a result of fewer incoming arbitrage cargoes.
Onshore stocks of Singapore fuel oil rose by 694,000 barrels (about 104,000 tonnes) in the week to July 20 to a total of 28.239 million barrels (approximately 4.2 million tonnes), according to data from International Enterprise (IE) Singapore released on Thursday.
“Arbitrage volumes are well below average that’s for sure, but the rising (onshore) inventories tells us either demand fell off a cliff, or fuel oil in floating storage is making its way in to onshore tanks,” said a Singapore based trader. “For me, it’s most probably the latter.”
A narrow arbitrage window between mid-May to mid-June had limited fuel oil flows into East Asia throughout June and July and largely led participants to expect the fuel oil markets to strengthen in July as overall supplies tightened and bunker demand remained firm.
The front-month Aug/Sept time spread of 380-cst fuel oil fell 75 cents on Thursday to a contango of $1.25 cents a tonne to Singapore quotes, its lowest since July 6. The same time spreads for the benchmark 180-cst fuel oil were also lower, slipping 50 cents to 75 cents a tonne to Singapore quotes.
The front-month 180-cst fuel oil crack to Dubai crude continued to fall, slipping to minus $5.54 a barrel to Singapore quotes, widening the gap from its recent multi-month high of $4.13 a barrel seen on July 11.
“Still seems the fuel oil crack is a bit too high at the moment and I think it has to come off, potentially bringing down other product margins along with it,” said a Singapore-based market analyst.
In the physical markets, cash discounts of both fuel oil grades were mixed on Thursday.
Cash discounts of the 380-cst fuel oil narrowing by 7 cents to $2.09 a tonne to Singapore quotes, lifted by stronger trades in the Platts window, while cash discounts of the 180-cst fuel FO180-SIN-DIF widened by 42 cents to 61 cents a tonne to Singapore quotes despite no window trades being reported for the lower viscosity fuel.
– State-owned Bangladesh Petroleum Corporation (BPC) has selected Vitol to supply the August cargoes of 180-cst high-sulphur fuel oil totalling 60,000 through three deliveries to the port of Chittagong on Aug 4-6, Aug 13-15 and Aug 29-31, industry sources said.
BPC’s remaining Sept, Oct, Nov and Dec tenders for an additional five cargoes totalling 100,000 tonnes of 180-cst fuel oil have not yet been announced, sources said.
– Oil investors who missed the chance to buy crude at multi-year lows earlier this year might get another shot at securing a bargain, as prices are likely to slip in the near term before recovering more steadily, analysts said.
– Saudi Aramco (IPO-ARMO.SE: Quote) is not worried about competition from other producers raising their crude sales in Asia as the number of customers the state oil giant deals with is also increasing, its chief executive said on Wednesday.
– Saudi Arabia, the world’s biggest oil exporter, regained its position as China’s top crude supplier in June, after losing out to Russia over the previous three months, customs data showed on Thursday.
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FUEL OIL CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 242.32 2.83 1.18 239.49 FO180-SIN Diff - 180cst -0.61 -0.42 221.05 -0.19 FO180-SIN-DIF Cargo - 380cst 234.31 2.05 0.88 232.26 FO380-SIN Diff - 380cst -2.09 0.07 -3.24 -2.16 FO380-SIN-DIF Bunker (Ex-wharf)- 380cst 235.81 1.35 0.58 234.46 BK380-B-SIN Bunker (Ex-wharf) Premium 1.50 -0.70 -31.82 2.20
Source: Reuters (Reporting by Roslan Khasawneh; Editing by William Hardy)