12-02-2018

ARA fuel oil stocks build 2.68% on slack bunker demand

Inventories of fuel oil stored in the Amsterdam-Rotterdam-Antwerp region increased by 2.68% to 932,000 mt in the week ended Wednesday, the latest data from PJK Consulting showed.

A draw in stocks is expected to take place next week after a surprise build of 25,000 mt this week with the movement of product east. Miltiadis Junior and Mikela P, VLCC and Suezmax vessels, loaded fuel oil from Rotterdam this week for discharge in Singapore. Also, Atina and Kapsali, two Suezmax vessels, are currently located in the Dutch port loading fuel, according to S&P Global Platts trade-flow software cFlow, which will contribute to a draw in inventories in the coming weeks.

However, the build has likely been supported by the muted NWE bunker demand, as ICE Brent futures have tumbled from a high of $71/b in late January to around $64/b Friday, keeping buyers away as they hope prices will fall further, thus fixing bunker volumes at cheaper rates. The current lack of appetite for bunker fuel in NWE has left traders shifting barrels east, supported by cheap Suezmax freight rates, even though the arbitrage is not economical on paper, sources said.

“There is less demand for bunkering in NWE as activity is shifting to Asia, and you see bigger vessels, which are less often in the market. However once they are in the market, they take bigger quantities,” a bunker buyer said.

ARA fuel oil inventories have been rangebound around the 1 million mt mark since the start of the year, yet could build if Asian demand does not materialize into European exports. The 380 CST East-West spread, which measure the premium of bunker fuel in Singapore over that in Rotterdam, was seen trading flat along the front three months this week, giving little clues as to how bunker appetite in Asia could change.

Compared to last year, inventories where about 200,000 mt lower in the first two weeks of February yet surged to their 2017 highs shortly after in March, data from PJK showed. If this trend repeats itself this year, we could see more fuel oil being arbitraged between the two regions as traders look to profit by locking in wide spreads.

In Singapore, commercial stockpiles of heavy distillates rose by 5.62% in the week ended February 7, according to data released by International Enterprise Singapore. Seven VLCCs have sailed east from Rotterdam so far this year to take bunker fuel to the Asian bunkering hub. Total stocks of heavy distillates, which IE describes as “residues” and include cracked and straight run fuel oil and low sulfur waxy residue, were reported at 23.78 million barrels. That compared with 22.52 million barrels reported a week earlier.

Source: Platts

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