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Feb-arrival LSFO arbitrage volumes to Singapore seen dropping from Jan: traders

Incoming arbitrage low sulfur fuel oil volumes into Singapore in February are expected to decline to nearly 1.9-2 million mt from January’s about 2.2 million mt, traders told S&P Global Platts.

Most of the declines are expected to originate from Europe amid bad weather in the Mediterranean, as well as from Brazil, with Petrobras expected to bring in slightly lower volumes to Singapore.

“The vessels that typically originate from the Black Sea sometimes call at the Mediterranean to top up, that’s not happening any more because of the bad weather in the region,” said a trader bringing in one of the vessels.

Additionally, a floating storage unit anchored off the coast of Malta, which was leased by Petronas and was used to blend volumes before being dispatched East has also been suspended due to the weather, with a company source at Petronas saying that operations were not likely to restart for another month.

Also crimping incoming volumes was the constraint of late-February arrival vessels possibly slipping into March, and the cargo onboard suffering a loss of nearly $15/mt in value, due to the prevailing February/March backwardation in the Singapore marine fuel 0.5% market.

The spread was assessed at $16.95/mt Jan. 19, Platts data showed, after remaining firmly in double-digit territory since Jan. 6, when it was assessed at $9.25/mt.

Commenting on the backwardation in the Singapore market, a European trader said, “My feeling is that people will move less and less [European VLSFO] to Singapore; if you have an unexpected weather delay then you will have to price your cargo in March, so the risk is huge that you will end up pricing in March and end up going from a good arbitrage to a terrible one.”

In addition, Petrobras’ shipments loading from Brazil, which in January stand at 600,000-700,000 mt, according to a company source, will see some diversions to the Caribbean, “with slightly fewer arrivals compared to January.”

African volumes meanwhile are expected to see an uptick, with a cargo of Skikda low sulfur straight-run fuel oil being shipped by Vitol on the ‘Astro Sculptor’ due to arrive in H2 February, according to traders, carrying the first cutter-stock volumes from Algeria to arrive in Singapore since the week ended Dec. 8, 2021, according to Enterprise Singapore data.

As a result of the lower fixtures to Singapore as well as a tight availability of blending components, after a short period in decline in early-January, the cash differential of the FOB Singapore marine fuel 0.5% assessment has once again begun to rise since mid-January, last assessed at $14.33/mt Jan. 20, Platts data showed.
Source: Platts

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