Asia Fuel Oil-380-cst flips into discount, hits near 2-mth low

After staying in the positive for two weeks, the cash differential on benchmark 380-cst fuel oil grade flipped into a discount and fell to a near two-month low on Monday, battered by thin demand for the heavy distillate, traders said.

The 380-cst discount stood at 16 cents a tonne to Singapore spot quotes, versus a premium of 69 cents a tonne last Friday, Reuters data showed.

End-user demand, particularly in the marine fuel segment, has been weak as flat prices
soared in June due to concerns of crude supply disruptions in Iraq.

Bunker prices typically move in tandem with that of crude values.

While fuel oil supply into Asia from the West is lower by more than 10 percent in July
compared to the previous month, weak demand has kept commercial inventories high.

Onshore fuel oil stocks in Singapore, Asia’s oil trading hub, rose 6 percent, or 1.337
million barrels, to a five-week high of 23.199 million barrels (3.65 million tonnes) in the week to July 3, data from trade agency IE Singapore showed last week.

A Singapore-based trader said several sellers’ tanks are almost full at the moment.
Furthermore, a couple of trading majors were also offering down spot marine fuel prices, fuel
oil traders said.

Current premiums of the ex-wharf 380-cst fuel oil stood at about $2-2.50 a tonne to cargo
prices, more than 30 percent lower than July term premiums at around $3-3.50 a tonne.
” Some majors are selling too aggressively, I could not compete,” said a Singapore-based
trader.

*CASH TRADES – Four 180-cst trades

Glencore sold to BP 20,000 tonnes for July 22-26 at a discount of $1.50 a tonne to Singapore spot quotes.

Glencore sold to KIB Energy 40,000 tonnes for August 2-6 at a discount of $1 a tonne to
balance July spot quotes.

Mercuria sold to Hin Leong 20,000 tonnes for July 22-26 at a discount of $1.50 a tonne to balance July spot quotes.

Lukoil sold to Vitol 20,000 tonnes for July 22-26 at a discount of $1.50 a tonne to Singapore spot quotes.

*MARKET NEWS

Methanol, a fuel used to power light aircraft and racing cars, is being tried out as an alternative for ships, highlighting its potential in an industry under pressure to cut emissions.

As well as being considered a green fuel, methanol is potentially cheaper and more plentiful than diesel or LNG.
Source: Reuters (Reporting by Jane Xie; Editing by Sunil Nair)