SINGAPORE, Oct 1 (Reuters) - Fuel oil arbitrage arrivals into Asia were expected to further depress the fuel oil market, as demand from China's small and medium sized refiners remained thin.
As China's economy slows, demand for refined products has decreased due to slowing industrial demand for power generation fuels.
Fuel oil is a a feedstock for small refiners in China known as teapots, which process it for middle distillates like diesel which is then sold off to factories and smelters for power generation.
China's slowdown has largely been attributed to the flatlining global economy which has seen a steep drop in overseas orders for exports from China's large factory base.
As China is expected to be closed for business for the next 7 days due to the week-long mid-autumn holidays, purchases by refiners are expected to remain capped at around 1.2 million tonnes in October versus about 1.8-2 million tonnes in September.
And with a heavier flow of arbitrage oil coming in from the West, prices are likely to be dragged even lower, traders said.
An estimated 5 million tonnes will end up in Asia, according to traders, with about 4 million tonnes expected to land in markets in Southeast Asia and North Asia.
Fuel oil's prompt intermonth spread was unchanged at a backwardation of $2.88 a tonne by the Asian close, according to Reuters data.
* TENDERS:
- India's Bharat Petroleum Corp Ltd
is offering 30,000 tonnes of 380-cst, for Oct. 23-27 lifting from Kochi, via tender which closes on Oct 4, with a one-day validity.
- India's Mangalore Refinery and Petrochemicals Corp
is offering 40,000 tonnes of vacuum gasoil, for Nov. 3-5 lifting from New Mangalore, via tender which closes on Oct 4, with a one-day validity.
- India's Hindustan Petroleum Corp Ltd
is offering 35,000-40,000 tonnes of 380-cst, for Oct. 12-14 lifting from Mumbai, via tender which closes on Oct. 1.
- Taiwan's Formosa Petrochemical Corp
is offering 40,000 tonnes of high sulphur fuel oil (HSFO), for Oct. 12-14 lifting from Mailiao, via tender which closes on Oct. 1, with same-day validity.
- Saudi's ExxonMobil is offering 80,000 tonnes of 650-cst, for Oct. 26-28 lifting from Yanbu, via tender which closes on Oct. 2, with a one-day validity.
- India's Essar Oil
sold 45,000 tonnes of 380-cst, for Oct 18-22 lifting from Vadinar, to Socar at a premium of $4.00-$5.00 a tonne above Middle East quotes, on a free-on-board (FOB) basis.
* CASH DEALS: one deal
- Petrochina buys 20,000 tonnes for October 21-25 loading from Shell. Deal price was at a premium of $1.50 to the Singapore benchmark.
CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 667.20 -1.70 -0.25 668.90 Diff - 180cst 2.05 0.75 57.69 1.30 Cargo - 380cst 655.80 -1.60 -0.24 657.40 Diff - 380cst 2.25 0.05 2.27 2.20 Bunker (Ex-wharf)- 662.00 -2.00 -0.30 664.00 380cst Bunker (Ex-wharf) 6.20 -0.40 -6.06 6.60 Premium SWAPS ($/T) ASIA CLOSE Change % Change Prev RIC (0830 GMT) Close Brent M1 111.81 -0.78 -0.69 112.59 180cst M1 665.88 -2.25 -0.34 668.13 180cst M1/M2 2.88 0.00 0.00 2.88 180cst M2 663.00 -2.25 -0.34 665.25 Visco M1 11.50 -0.88 -7.11 12.38 Visco M2 12.00 -0.63 -4.99 12.63 380cst M1 654.38 -1.37 -0.21 655.75 380cst M1/M2 3.38 0.25 7.99 3.13 380cst M2 651.00 -1.63 -0.25 652.63 Cracks 180-Dubai M1 -6.26 0.38 -5.72 -6.64 Cracks 180-Dubai M2 -6.03 0.35 -5.49 -6.38 East-West M1 37.00 1.50 4.23 35.50 East-West M2 37.00 0.50 1.37 36.50 Barges M1 628.88 -3.75 -0.59 632.63 Barges M1/M2 2.88 -1.00 -25.77 3.88 Barges M2 626.00 -2.75 -0.44 628.75 Crack Barges-Brent M1 -15.50 0.36 -2.27 -15.86 Crack Barges-Brent M2 -15.09 0.31 -2.01 -15.40
(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