July 2, 2012 / 12:33 PM / 5 years ago

Asia Fuel Oil-July/August lowest in two weeks

SINGAPORE, July 2 (Reuters) - Asia's fuel oil market weakened on Monday, with the prompt
July/August inter-month swaps value easing to a two-week low as sentiment was depressed by
potentially higher supply in August, while demand from China remained low. 
    The July/August spread, the premium of the July fixed-price value over the August value,
fell over a dollar to close at $4.50 a tonne, the lowest since June 14, according to Reuters
data. The curve flattened in a weaker market as market players held out for cheaper August
prices, which brought July down by even more.
    Trading in the swaps market appeared to have slowed from the previous session. While trading
of July/August amounted to at least 200,000 tonnes, volumes for the August/September contract
were thin at around 50,000 tonnes.
    The August/September closed down 38 cents at $3.88 a tonne, the lowest in a week. 
    On the physical trading window only one deal was done. Bids and offers placed were lower as
well, pushing down cash differentials for both the 180-censtistoke (cst) and 380-cst grades. 
    The cash differential for 180-cst fell to a 1.5-week low of $3.75 a tonne above Singapore
spot quotes, while the 380-cst differential was at a four-session low of $4.25 a tonne above
Singapore quotes. 
    Traders said that while the July market was tight, with lower volumes of Western inflows,
fundamentals pointed to a softer market in August as Western imports to Asia are expected to
rise. 
    Demand from China's teapot refiners is also likely to remain sluggish as margins are still
weak, they said. 
    Japan's demand for low-sulphur fuel oil for power generation, however, is expected to
increase by more than 40 percent to 21.3 million kilolitres in the fiscal year to March 2013 if
no other nuclear reactors come online than the two already approved, the Institute of Energy
Economics of Japan said. 
    The country's first nuclear reactor to restart since the Fukushima crisis is Kansai Electric
Power Co's 1,180-megawatt No. 3 unit at its Ohi atomic plant. The unit was restarted on Sunday.
 
    
    **Tenders: Indian Oil Corp offered 15,000 tonnes of 180-cst, for July 26-28 lifting
from Haldia, via tender which closes on July 5, with one-day validity.
    Indian refiner Essar Oil offered 65,000 tonnes of carbon black feedstock (CBFS),
for July 15-17 lifting from Sikka, via tender which closes on July 2, with one-day validity.
   
     
    **Cash trades: One 380-cst deal.
    - Shell bought 20,000 tonnes, for July 17-21 lifting, from Mercuria at a premium of $4.00 a
tonne above Singapore spot quotes. 
    
 CASH ($/T)                  ASIA CLOSE   Change  % Change  Prev     RIC
                                                            Close    
 Cargo - 180cst                   595.70   13.30      2.28   582.40  FO180-SIN
 Diff - 180cst                      3.75   -0.75    -16.67     4.50  FO180-SIN-DIF
 Cargo - 380cst                   586.20   14.40      2.52   571.80  FO380-SIN
 Diff - 380cst                      4.25   -0.25     -5.56     4.50  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst        592.00    0.00      0.00   592.00  BK380-B-SIN
 Bunker (Ex-wharf) Premium          5.80  -14.40    -71.29    20.20                  
                                                                                     
 SWAPS  ($/T)                ASIA CLOSE   Change  % Change  Prev     RIC
                             (0830 GMT)                     Close    
 Brent M1                          96.32    3.32      3.57    93.00              
 180cst M1                        593.13   14.13      2.44   579.00                
 180cst M1/M2                       4.50   -1.13    -20.00     5.63                
 180cst M2                        588.63   15.25      2.66   573.38                
 Visco M1                          10.00   -0.63     -5.88    10.63                
 Visco M2                          10.00   -0.63     -5.88    10.63                
 380cst M1                        583.13   14.75      2.60   568.38                
 380cst M1/M2                       4.50   -1.13    -20.00     5.63                
 380cst M2                        578.63   15.88      2.82   562.75                
 Cracks 180-Dubai M1               -3.41   -0.97     39.75    -2.44                
 Cracks 180-Dubai M2               -3.86   -0.97     33.56    -2.89                
 East-West M1                      37.00   -0.25     -0.67    37.25             
 East-West M2                      35.75   -0.88     -2.39    36.63             
 Barges M1                        556.13   14.38      2.65   541.75               
 Barges M1/M2                       3.25   -1.75    -35.00     5.00                
 Barges M2                        552.88   16.13      3.00   536.75               
 Crack Barges-Brent M1            -11.26   -0.84      8.06   -10.42                
 Crack Barges-Brent M2            -11.91   -0.97      8.87   -10.94                
 
 (Reporting by Lee Yen Nee, editing by Jane Baird)

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