May 30, 2012 / 11:53 AM / 5 years ago

Asia Fuel Oil-Prompt June-Sept structure firms

SINGAPORE, May 30 (Reuters) - Asia's fuel oil market strengthened on Wednesday, with its
prompt structure, June to September, firming in backwardation while its cracks narrowed for the
first time in three sessions, as lower fixed-price levels stoked buying interests.	
    The improved demand and the expectation of tighter supplies next month, from the West and
the Middle East, kept the June/July timespread at above $5.00 a tonne for a fifth straight
session, after languishing below that level for nearly three months, Reuters data showed.
   	
    However, the prompt physical market remained lacklustre, with the month's bull players, BP
and Brightoil, absent from buying physical cargoes for a third consecutive session, after
collectively picking up 1.38 million tonnes since the start of the month.	
    "Players are expecting the market to be fundamentally stronger, even without the boost of a
bull play, but very cautiously so. It looks like supplies are a tad lower, and demand could get
better due to lower flat-price levels," a Singapore-based Asian trader said.	
    Western arbitrage arrivals for June are expected to be around 4 million tonnes, down from
this month's 4.4 million-4.5 million tonnes, while Middle East barrels remain limited by peak
summer demand in Saudi Arabia and the increasing difficulty in buying Iranian lots.	
    Players are hopeful that falling flat-price levels will boost demand from China's teapot
refiners for straight-run fuel oil, which has been poor since soaring fixed-price levels curbed
buying in March.	
    The looming summer in Japan, which has all of its nuclear capacity shut down, is expected to
drive premiums for low-sulphur fuel oil towards record-high levels of above $200.00 a tonne to
Singapore spot quotes, up from a previous high $170.00-$180.00. 	
    This expectation has kept the prompt June/July timespread firm at $5.63 a tonne in
backwardation, up 50 cents from a day earlier, with moderate volumes of around 200,000 tonnes
traded, while fuel oil's front-month crack narrowed to a one-week high of minus $3.36 a barrel,
up 61 cents.	
    The weaker prompt market was reflected by lower trade levels for a physical 380-cst cargo,
for loading June 14-18, at a premium of $3.50 a tonne to Singapore spot quotes, down from $4.00
a day ago. 	
    	
    	
 TENDERS/SPOT                                                                               
 ISSUER                  BUY/SELL       GRADE        VOL      LAYCAN        AWARD
                                                     ('000T)                
 India/IOC               SELL           380          30-35KT  June 15-17    Cancelled
                                                              (Chennai)     
 Korea/EWP               BUY            HSFO         50KT     June 13-17    Hanwha/+$6.50/T
                                                              (Ulsan)       (CFR)
                                                     50KT     June 26-30    Hanwha/+$4.50/T
                                                              (Ulsan)       (CFR)
                                                                                            
 CASH TRADES                                                                                
 Grade                   Seller         Buyer        Vol      Laycan        Price
                                                                            (Transaction)
                    380  PetroChina     PetroSeraya  20KT     June 14-18    +$3.50/T
                                                                                            
 CASH ($/T)              ASIA CLOSE     Change       %        Prev Close    RIC
                                                     Change                 
 Cargo - 180cst                $653.55       -$8.70    -1.31       $662.25  FO180-SIN
 Diff - 180cst                   $7.00       -$0.15    -2.10         $7.15  FO180-SIN-DIF
 Cargo - 380cst                $636.10       -$8.95    -1.39       $645.05  FO380-SIN
 Diff - 380cst                   $3.38       -$0.07    -2.03         $3.45  FO380-SIN-DIF
 Bunker (Ex-wharf)-            $640.00      -$10.00    -1.54       $650.00  BK380-B-SIN
 380cst                                                                     
 Bunker (Ex-wharf)               $3.90       -$1.05   -21.21         $4.95                  
 Premium                                                                    
                                                                                            
 SWAPS  ($/T)            ASIA CLOSE     Change       %        Prev Close    RIC
                         (0830 GMT)                  Change                 
 Brent M1                      $105.60       -$2.11    -1.96       $107.71              
 180cst M1                     $647.75       -$8.25    -1.26       $656.00                
 180cst M1/M2                    $5.63        $0.50     9.75         $5.13                
 180cst M2                     $642.13       -$8.75    -1.34       $650.88                
 Visco M1                       $14.38        $0.63     4.58        $13.75                
 Visco M2                       $11.88       -$0.25    -2.06        $12.13                
 380cst M1                     $633.38       -$8.87    -1.38       $642.25                
 380cst M1/M2                    $3.13       -$0.37   -10.57         $3.50                
 380cst M2                     $630.25       -$8.50    -1.33       $638.75                
 Cracks 180-Dubai M1            -$3.36        $0.61   -15.37        -$3.97                
 Cracks 180-Dubai M2            -$3.54        $0.62   -14.90        -$4.16                
 East-West M1                   $41.88        $1.13     2.77        $40.75             
 East-West M2                   $40.50        $0.50     1.25        $40.00             
 Barges M1                     $605.88       -$9.37    -1.52       $615.25               
 Barges M1/M2                    $4.25       -$0.13    -2.97         $4.38                
 Barges M2                     $601.63       -$9.25    -1.51       $610.88               
 Crack Barges-Brent M1         -$13.04        $0.69    -5.03       -$13.73                
 Crack Barges-Brent M2         -$13.22        $2.56   -16.22       -$15.78                
 	
 (Reporting by Yaw Yan Chong; editing by James Jukwey)

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