Asian fuel oil markets diverged on Tuesday as the prompt month time spreads for 380cst fuel oil formed a contango structure in one market platform, and a backwardated structure in another.
In the Platts swaps market, the 380cst April-May spreads flipped into backwardation on Tuesday from Monday's discount of 75 cents a tonne below Singapore quotes. In the Intercontinental Exchange, however, the same time spreads remained in a contango structure, albeit narrower from Monday's settlement, industry sources said.
The Platts swaps for 380cst April-May spreads were valued at a premium of 50 cents a tonne above Singapore quotes, while in the Intercontinental Exchange, the same spreads were traded at a discount around 40 cents a tonne to Singapore quotes around the same time, sources said.
A backwardated price curve, with prompt prices higher than those further out, implies tight supplies of immediate deliveries.
Yet Singapore's fuel oil market is well supplied in the short term, with current onshore inventories above last years average of 24.776 million barrels. In the week to March 30, inventories stood at 25.423 million barrels despite three consecutive weeks of stock draws.
"I'm puzzled," said one Singapore-based trader, referring to the divergence.
"It just goes to show there's still some kind of play going on," said another Singapore trader.
In March, Singapore's fuel oil market was in the midst of its first big fuel oil trading play since mid-2015, with nearly the same handful of traders buying and selling huge volumes of the residual fuel, setting up wide swings in prices and spreads.
Two physical trades were reported on Tuesday totalling 40,000 tonnes of 380cst fuel oil. KIB sold one 20,000 tonne cargo to Coastal at $162 a tonne for May 1 to 5 delivery while Chevron sold the second cargo to Vitol at a discount of $1 to Singapore quotes for delivery between April 20 and 24, sources said.
In arbitrage flows, industry sources said the latest landed Iranian cargoes flowing from Bandar Mahshahr to Singapore were priced at a premium of approximately $4 a tonne to 180cst Singapore uotes.
In Russia, fuel oil output fell by 0.41 million barrels per day (mbpd) in February compared to last year as did fuel oil yields which sank to a record low of 19.6 percent, said Energy Aspects in its Russia and former Soviet Union (FSU) data review released on Tuesday.
"Total FSU fuel oil exports were down year-on-year by 0.69 mbpd to 0.79 mbpd in February, a record low, led by Russian fuel oil exports plummeting by 21.9 percent from last month to 0.61 mbpd, lower by 0.53 mbpd from last year," the consultancy said, while noting that the decline comes despite weather conditions improving.
A group of 26 institutional investors has issued a summons against bankrupt Danish ship fuel supplier OW Bunker in the latest stage of a legal campaign for allegedly misleading them in its 2014 initial public offer (IPO).
At least three European trade houses are keeping gasoline aboard long-range tankers in Asia in an extremely rare move as the market is badly hit by oversupply, traders said on Monday. Some of the traders are unable to discharge the cargoes which came in from Europe to Singapore/Malaysia as onshore tanks in the latter are full, while others are "floating" volumes in view of the persistent contango market structure.
India is set to import at least 400,000 barrels per day (bpd) of Iranian oil in the year from April 1, with refiners looking to ramp up purchases after the sanctions targeting Tehran ended in January, industry sources familiar with the matter said.
Source: Hellenic Shipping News