Asia Fuel Oil-Cash discounts narrow but record ARA stocks weigh on market


More active buying interest lifted Singapore fuel oil cash differentials on Friday after data published on Thursday showed inventories in the city-state had dropped back from an 8-month high, but record inventory levels in northwest Europe suggested there will be no near-term reduction in supplies.

Industry sources said the mix of bullish and bearish inventory data for crude and fuel oil in key storage hubs over the past week made it difficult to gauge near term market direction.

Ten trades were reported in the Singapore Platts window on Friday totalling 220,000 tonnes of the 380-cst fuel oil, most of which were concluded at higher price levels in comparison to earlier trades in the week.

The pick up in demand on Friday helped to lift cash discounts of the 380-cst fuel to their narrowest this week at minus $1.15 cents a tonne to Singapore quotes, up 4 cents a tonne from the previous session. But the record inventories in the Amsterdam-Rotterdam-Antwerp (ARA) storage hub, a key exporter of fuel oil into Singapore and Asia, weighed on sentiment.

“It’s a bit of a shock to see this steep rise (in ARA stocks)… not long ago we were still talking about a tight market,” one Singapore fuel oil trader said. Fuel oil inventories independently held in storage in the ARA region rose sharply for a second consecutive week, jumping 20 percent, or 227,000 tonnes, in the week to March 16 amid steady imports and fewer exports, data from Dutch consultancy PJK International showed. At a total of 1.398 million tonnes, ARA fuel oil inventories are at their highest on record since PJK began gathering the data in 1995.

PJK’s Patrick Kulsen said there were no VLCCs of fuel oil scheduled to sail in the coming week, but imports continue to arrive from refineries in Estonia, France, Norway and the United Kingdom. This came after official data on Thursday showed Singapore onshore fuel oil inventories dropped 3 percent, or 120,000 tonnes, in the week to March 15, after having reached a near 8-month high of 4.14 million tonnes in the previous week. [O/SING1}

The rise in ARA inventories helped nudge the front month 380-cst East-West arbitrage spread higher to about $16 a tonne on the Intercontinental Exchange (ICE) but traders said the spread would have to rise further before prompting fresh ARA arbitrage supplies into Singapore.

– Venezuelan state oil company PDVSA has offered Russian counterpart Rosneft a stake in a joint venture in the country’s Orinoco Belt extra-heavy crude area, five industry sources said, in a sign of the Latin American country’s dire economic situation and Moscow’s growing muscle there.
– Latin American countries are becoming more reliant on costly fuel imports amid floundering efforts to bolster domestic oil output and expand refinery capacity.

 FUEL OIL                                                                                   
 CASH ($/T)                   ASIA CLOSE      Change  % Change  Prev Close  RIC
 Cargo - 180cst                       294.39   -4.11     -1.38      298.50  FO180-SIN
 Diff - 180cst                         -0.95   -0.13     15.85       -0.82  FO180-SIN-DIF
 Cargo - 380cst                       288.20   -3.66     -1.25      291.86  FO380-SIN
 Diff - 380cst                         -1.15    0.04     -3.36       -1.19  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst            290.00   -3.50     -1.19      293.50  BK380-B-SIN
 Bunker (Ex-wharf) Premium              1.80    0.16      9.76        1.64

Source: Reuters

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