Asia Fuel Oil-Viscosity spread falls to near four-month low

The viscosity spread eased to a near four-month low on Wednesday, dragged down by thin demand for 180-cst as a blendstock due to a lacklustre Asian fuel oil market.

The viscosity spread, which measures the price difference between the frontline 180-cst and 380-cst swaps, stood at $5.50 a tonne on Wednesday, down 25 cents a tonne from the day before, Reuters data showed.

“Cargoes for July arrival in the East from the West are still thin, but flat price is too
high so consumption will drop,” said a Singapore-based trader.

“Inventory of heavy distillate is also still high in the region.”

Total fuel oil supplies into Asia are estimated at 3.09 million tonnes for July, more than
20 percent below this year’s monthly average, Reuters analysis of shipping data showed.

In other market news, Taiwan’s Formosa sold a cargo of pyrolysis fuel oil for July 15-17
loading to Shell at a premium of about $80 a tonne to Singapore spot 180-cst quotes, a source
close to the matter said on Wednesday.

Formosa’s PFO, which has a viscosity of around 3-35 centistoke, is often used to blend down the viscosity of heavy fuel oil, traders said.

The last cargo of a similar size for loading in June was sold to Vitol at a premium of
around $70 a tonne to Singapore spot 180-cst quotes.

Bharat Petroleum Corp Ltd was heard to have sold 40,000 tonnes of 380-cst for loading over August 7-8 from Cochin to a Middle Eastern trading firm, while Indian Oil Corp was heard to have sold 15,000 tonnes of 380-cst for loading over July 11-13 from Haldia to Petronas.

Price details, however, were not immediately available.

*CASH TRADES – Four deals.

Lukoil sold to Glencore 20,000 tonnes of 380-cst for July 21-25 at a premium of $1 a tonne
to Singapore spot quotes.

BP bought from Mercuria 20,000 tonnes of 180-cst for July 17-21 at a discount of $2 a tonne to Singapore spot quotes.

Shell sold to Hin Leong 20,000 tonnes of 380-cst for July 17-21 at parity to average July
spot quotes.

BP bought from PetroChina 20,000 tonnes of 180-cst for July 20-24 at a discount of $1 a
tonne to Singapore spot quotes.
Source: Reuters (Reporting by Jane Xie; Editing by Sunil Nair)