SINGAPORE, Oct 9 (Reuters) - Asia's fuel oil cash differentials recovered on Tuesday as low prices helped to stir up buying interest.
Cash differential for 180-centistoke (cst) fuel oil narrowed more than a dollar to a discount of 40 cents a tonne above Singapore spot quotes, the highest in three sessions.
The cash differential represents the amount buyers are willing to pay above or below benchmark prices.
Abundant supply of the lower viscosity grade, due to high Western arbitrage arrivals, has caused prices to sink, and the prompt October/November inter-month spread flipped into a contango structure for the first time in seven months.
Western arbitrage inflows for October are expected to increase by 50 percent from September to around 5.2 million tonnes, according to a Reuters survey of traders and shipping brokers.
However, low prices have also encouraged buyers to come forward to make purchases, with two deals reported done during the physical trading window. Shell sold a 40,000-tonne cargo and another 20,000-tonne parcel at a discount of 70-75 cents to Singapore spot quotes.
Demand also emerged from Pakistan, with Pakistan State Oil
issuing a tender to buy 455,000 tonnes of high sulphur fuel oil (HSFO) and 110,000 tonnes of low sulphur fuel oil (LSFO) for delivery over November to January. The tender closes on Oct 19, with a one-week validity.
Pakistan uses fuel oil for power generation and consumption usually rises towards the end of year due to heating demand during the winter.
Another South Korean utility has entered the spot market to seek supply. East-West Power issued a tender to buy 50,000 tonnes of HSFO for November. It last bought 50,000 tonnes of HSFO for September-delivery from Hyundai at a premium of $4.93 a tonne to Singapore quotes, on a cost-and-freight (CFR) basis.
In the low sulphur fuel oil market, Indonesia's state-owned Pertamina
has concluded its term contract talks with Mitsui, Itochu and Shell to supply low sulphur waxy residue (LSWR) in the fourth quarter, industry sources said.
Premiums were heard to be around $50.00-$55.00 a tonne to Singapore quotes, significantly lower than last quarter's $130.00 a tonne.
* TENDERS:
- South Korea's East-West Power (EWP) is seeking 50,000 tonnes of HSFO, for Nov. 1-5 delivery to Ulsan, via a tender which closes on Oct. 15.
- Pakistan State Oil is seeking seven 65,000-tonne cargoes of HSFO and two 55,000-tonne cargoes of LSFO, for delivery over November-January, via a tender which closes on Oct. 19, with offers to remain valid till Oct. 26.
- India's Mangalore Refinery and Petrochemicals Ltd
sold 40,000 tonnes of vacuum gasoil (VGO), for Nov. 3-5 lifting from New Mangalore, to Vitol at a premium of $6.00 a tonne above Dubai crude, on a free-on-board (FOB) basis.
* CASH DEALS: Two 180-cst and one 380-cst trades
- Shell sold 20,000 tonnes of 180-cst, for Oct. 24-28 loading, to PetroChina at a discount of 50 cents a tonne to balance October average quotes, which is equivalent to a discount of 70 cents a tonne to Singapore quotes.
- BP bought 40,000 tonnes of 180-cst, for Oct. 24-28 loading, from Shell at a discount of 75 cents a tonne to Singapore quotes.
- Gunvor sold 40,000 tonnes of 380-cst, for Oct. 27-31 loading, to BP at a premium of 75 cents a tonne above balance October average quotes, which is equivalent to a premium of 80 cents above Singapore quotes.
CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 640.45 1.45 0.23 639.00 Diff - 180cst -0.40 1.10 -73.33 -1.50 Cargo - 380cst 630.60 0.75 0.12 629.85 Diff - 380cst 0.80 1.05 -420.00 -0.25 Bunker (Ex-wharf)- 635.00 0.00 0.00 635.00 380cst Bunker (Ex-wharf) 4.40 -0.75 -14.56 5.15 Premium SWAPS ($/T) ASIA CLOSE Change % Change Prev RIC (0830 GMT) Close Brent M1 112.54 1.73 1.56 110.81 180cst M1 640.50 0.50 0.08 640.00 180cst M1/M2 -0.75 0.50 -40.00 -1.25 180cst M2 641.25 0.00 0.00 641.25 Visco M1 10.63 0.63 6.30 10.00 Visco M2 11.50 0.50 4.55 11.00 380cst M1 629.88 -0.12 -0.02 630.00 380cst M1/M2 0.13 0.38 -152.00 -0.25 380cst M2 629.75 -0.50 -0.08 630.25 Cracks 180-Dubai M1 -9.69 -1.38 16.61 -8.31 Cracks 180-Dubai M2 -9.06 -1.27 16.30 -7.79 East-West M1 34.50 0.00 0.00 34.50 East-West M2 35.25 0.50 1.44 34.75 Barges M1 606.00 0.50 0.08 605.50 Barges M1/M2 0.00 1.00 -100.00 -1.00 Barges M2 606.00 -0.50 -0.08 606.50 Crack Barges-Brent M1 -19.31 -1.81 10.34 -17.50 Crack Barges-Brent M2 -18.38 -1.57 9.34 -16.81
(Reporting by Lee Yen Nee; Editing by Alison Birrane)
((lee.yennee@thomsonreuters.com)(+65 6870 3823)(Reuters Messaging: lee.yennee.thomsonreuters.com@reuters.net))
Keywords: MARKETS ASIA/FUELOIL