SINGAPORE: Asian fuel oil spreads and cracks remain strong due to continued optimism about supply and demand in the market, traders said on Monday.
The spread in prices between September and October for 180- and 380-centistoke high sulphur fuel oil remained at a premium, indicating supply and demand was in balance traders said.
The spread for both 180-cst was unchanged at a premium of $1.75 for the fourth straight session. Spreads for 380-cst were also unchanged at $1.75.
Cracks for 180-cst high sulphur fuel were holding close to a two-month high on Monday.
"Currently, the market is pretty balanced but if prices strengthen further it would indicate the market is tightening," one Singapore trader said.
That came as prices for 180- and 380-cst surged more than 15 percent in Monday partly on the back of rising oil prices but also because of an increase in trading of paper derivatives, a second Singapore trader said.
But pricing of bids and offers during the Platt's window suggested traders expected softness to develop in the coming weeks as more supply arrives from the West.
While four trades were recorded in the Platt's window, including three by Hin Leong, "there is no real demand in physical cargoes," the second trader said.
Around 3.6-3.8 million tonnes of fuel oil is expected to arrive in East Asia from the West in September, based on assessments by Thomson Reuters Supply Chain and Commodities Research.
But arbitrage flows are expected to be higher in October, traders said.
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SINGAPORE CASH DEALS: Four trades reported.
- Hin Leong bought two 23,000 tonne cargoes of 380-cst high sulphur fuel oil from Mercuria at a $1 per tonne premium to Singapore prices for delivery between Sept. 20-24.
- Hin Leong bought 20,000 tonnes of 380-cst high sulphur fuel oil from Mercuria at a premium of $0.75 cents per tonne to the balance of average September prices for delivery between Sept. 30-Oct. 4.
- Coastal bought 20,000 tonnes of 380-cst high sulphur fuel oil from Mercuria at $252.50 per tonne for delivery between Sept. 30-Oct. 4.
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