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Asia Fuel Oil-Weakens on poor demand, heavy arb supply flows

Wednesday, 3 Oct 2012 | 7:09 AM ET

SINGAPORE, Oct 3 (Reuters) - Asia's fuel oil market remained depressed on Wednesday, with the prompt inter-month spread easing to a four-month low on weak demand, and further exacerbated by heavier arbitrage supply flows into Asia.

Fuel oil's October/November inter-month spread fell to nearly four-month low of $1.88 a tonne in backwardation, Reuters data showed.

Demand from China has taken a big hit due to the lower requirement for diesel in the world' second-largest oil consumer. Straight-run fuel oil is typically used as a feedstock by small and medium refiners on the southern and northern coasts in China.

Fuel oil arbitrage flows into Asia are expected to hit around 5 million tonnes of Western fuel oil this month, up from the previous month's 4.6 million tonnes. This is likely to drive prices down further, traders said.

Fuel oil's refining margin widened to a discount of $6.78 a barrel to Dubai crude, Reuters data showed.

* TENDERS:

- India's Hindustan Petroleum Corp Ltd

sold 35,000-40,000 tonnes of 380-cst, for Oct. 12-14 lifting from Mumbai, to PetroChina at an unspecified price.

* CASH DEALS: One trade. - Gunvor sold a 20,000 tonnes October 19-23 loading cargo to BP at a premium of $2.25 a tonne to the Balance October average prices of the Singapore benchmark. CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 657.55 -9.25 -1.39 666.80 Diff - 180cst 1.70 -0.15 -8.11 1.85 Cargo - 380cst 646.05 -9.55 -1.46 655.60 Diff - 380cst 2.65 0.55 26.19 2.10 Bunker (Ex-wharf)- 651.50 -9.50 -1.44 661.00 380cst Bunker (Ex-wharf) 5.45 0.05 0.93 5.40 Premium SWAPS ($/T) ASIA CLOSE Change % Change Prev RIC (0830 GMT) Close Brent M1 110.67 -1.47 -1.31 112.14 180cst M1 656.38 -9.25 -1.39 665.63 180cst M1/M2 1.88 -0.50 -21.01 2.38 180cst M2 654.50 -8.75 -1.32 663.25 Visco M1 12.13 0.88 7.82 11.25 Visco M2 13.13 1.13 9.42 12.00 380cst M1 644.25 -10.13 -1.55 654.38 380cst M1/M2 2.88 -0.25 -7.99 3.13 380cst M2 641.38 -9.87 -1.52 651.25 Cracks 180-Dubai M1 -6.78 -0.03 0.44 -6.75 Cracks 180-Dubai M2 -6.48 -0.04 0.62 -6.44 East-West M1 38.00 0.75 2.01 37.25 East-West M2 37.75 0.75 2.03 37.00 Barges M1 618.38 -10.00 -1.59 628.38 Barges M1/M2 1.63 -0.50 -23.47 2.13 Barges M2 616.75 -9.50 -1.52 626.25 Crack Barges-Brent M1 -15.78 0.01 -0.06 -15.79 Crack Barges-Brent M2 -15.47 -0.06 0.39 -15.41

(Reporting by Lee Yen Nee and Luke Pachymuthu; Editing by William Hardy)

((lee.yennee@thomsonreuters.com)(+65 6870 3823)(Reuters Messaging: lee.yennee.thomsonreuters.com@reuters.net))

Keywords: MARKETS ASIA/FUELOIL