Asia Fuel Oil-Cracks, Spreads Tight; Bunker Prices Climb

Maritime Activity Reports, Inc.

November 25, 2015

Asia's fuel oil crack for benchmark 180-centistroke rebounded to a discount of $6.79 a barrel on Wednesday, gaining as bunker prices firmed on the possibility of reduced arbitrage volumes from the West next month even as the market remained quiet, traders said.

The spread for the benchmark also remained tight, holding around a four-month high, at a discount of $2.75 - a further indication of possible lower arbitrage volumes, traders said. "We don't see much arbitrage cargo - somewhere in the low 3s (million tonnes) in December," said one Singapore trader. Other traders have estimated volumes could hit 4 million tonnes, similar to November's level.     

"Bunker prices have picked up and fundamentals kicked in," the trader said. Bunker prices would definitely continue to rise until the end of November and possibly carry on climbing next month, the trader said.

In Singapore, the bunker price for 180-cst in the fourth quarter is forecast to average $239 a tonne, compared with $278 a tonne in the third quarter and $301 a tonne for the whole year, consultant Energy Aspects said in a report on Wednesday. Despite the rebound, the market remained quiet with some Singapore traders already closing their books and preparing for a long leave, another trader said.

Fuel oil demand in China has continued to fall, dropping 9.3 percent so far this year to 561,000 barrels per day, against 621,000 bdp in 2014 and 672,000 bpd in 2013, the Energy Aspects report said. Fuel oil demand in Japan is unlikely to find support with the Japan Metrological Agency forecasting a warmer than usual winter, the Energy Aspects report added.

Korea East-West Power Co Ltd (EWP) has bought 50,000 tonnes of Singaporean high sulphur fuel oil from Hyundai Corp for arrival between Dec. 4-8 via a tender that closed on Monday, a source from the utility said on Wednesday.
REFINERY NEWS: China has given preliminary approval to independent refiner Shandong Haiyou Petrochemical Group Co Ltd for an annual import quota of 3.2 million tonnes of crude oil, the country's oil industry association said on Wednesday.
Chinese state-run oil and chemicals trader Sinochem has won approval to export refined fuel products, as Beijing moves to ease a domestic fuel glut and boost investment, two people with direct knowledge of the matter said on Wednesday.
SINGAPORE CASH TRADES: Two deals reported:

  • Mercuria sold 20,000 tonnes of 180-cst high sulphur fuel oil to Hin Leong for Dec. 21-25 loading at a discount of $2.00 to Singapore quotes.
  • Mercuria sold 20,000 tonnes of 180-cst high sulphur fuel oil to Vitol for Dec. 21-25 loading at a discount of $2.00 to Singapore quotes.
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