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Asia Fuel Oil-Inter-month spreads flip back into backwardation

Wednesday, 10 Oct 2012 | 7:35 AM ET

SINGAPORE, Oct 10 (Reuters) - Asia's fuel oil market extended gains on Wednesday, with the first four inter-month spreads gaining a dollar and above amid renewed hopes that demand would recover as players start stockpiling for winter.

The balance October/November inter-month spreads, which remains prompt until next Monday, flipped back into a backwardation structure on Wednesday.

The contract was valued at a backwardation of $1.00 a tonne by the Asian close, the highest in nearly a week, according to Reuters data.

South Korean utilities have entered the spot market to procure supply for the upcoming winter. Western Power and East-West Power are seeking 80,000 tonnes of high sulphur fuel oil (HSFO) for November-delivery.

Enquiries from Chinese independent refineries have also emerged just days after the country returns from a week-long public holiday, industry sources said. However, most refiners preferred staying at the sidelines due to the uncertain outlook of crude prices.

In Japan, fuel oil consumption has fallen as summer temperatures have come off, but demand is expected to pick up slightly during the winter.

Tokyo Electric Power's (Tepco) fuel oil consumption fell in September to 678,000 kilolitres, down 12 percent from the previous month. However, the utility bought slightly more fuel oil for the month at 685,000 kilolitres versus August's 677,000 kilolitres.

* TENDERS:

- Taiwan's Formosa is offering 13,000 tonnes of pyrolysis fuel oil and 40,000 tonnes of high sulphur fuel oil, for Oct. 23-25 lifting from Mailiao, via tender which closes on Oct. 11, with a same-day validity.

* CASH DEALS: No trades reported

* REFINERY NEWS:

- Vietnam has shut its sole refinery after a glitch at a gasoline-making unit, forcing the plant's buyers such as Saigon Petro to cover cargoes at short notice, industry sources said on Wednesday.

CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 662.80 22.35 3.49 640.45 Diff - 180cst 0.75 1.15 -287.50 -0.40 Cargo - 380cst 650.45 19.85 3.15 630.60 Diff - 380cst 1.00 0.20 25.00 0.80 Bunker (Ex-wharf)- 655.00 20.00 3.15 635.00 380cst Bunker (Ex-wharf) 4.55 0.15 3.41 4.40 Premium SWAPS ($/T) ASIA CLOSE Change % Change Prev RIC (0830 GMT) Close Brent M1 114.49 1.95 1.73 112.54 180cst M1 662.50 22.00 3.43 640.50 180cst M1/M2 1.00 1.75 -233.33 -0.75 180cst M2 661.50 20.25 3.16 641.25 Visco M1 12.75 2.12 19.94 10.63 Visco M2 12.38 0.88 7.65 11.50 380cst M1 649.75 19.87 3.15 629.88 380cst M1/M2 0.63 0.50 384.62 0.13 380cst M2 649.13 19.38 3.08 629.75 Cracks 180-Dubai M1 -8.13 1.56 -16.10 -9.69 Cracks 180-Dubai M2 -7.68 1.38 -15.23 -9.06 East-West M1 37.00 2.50 7.25 34.50 East-West M2 37.00 1.75 4.96 35.25 Barges M1 625.50 19.50 3.22 606.00 Barges M1/M2 1.00 1.00 N/A 0.00 Barges M2 624.50 18.50 3.05 606.00 Crack Barges-Brent M1 -18.41 0.90 -4.66 -19.31 Crack Barges-Brent M2 -17.35 1.03 -5.60 -18.38

(Reporting by Lee Yen Nee; Editing by William Hardy)

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

Keywords: MARKETS ASIA/FUELOIL