Asia Fuel Oil-Ex-wharf premiums squeezed by slow demand, excess supplies

DUBAI: A surplus of supplies and slow seasonal demand for marine fuels continued to weigh on ex-wharf premiums in Asia's fuel oil markets.

Over the near term, traders said the upside potential of ex-wharf premiums was limited due to abundant supplies of the fuel and limited demand from shippers and charters, prompting suppliers to offer ex-wharf parcels at lower premiums, industry sources said.

"It's hard to find buyers," one Singapore-based trader said.

Industry sources said spot ex-wharf offers stood at a $1 to $1.50 a tonne premium above Singapore quotes on Tuesday while some suppliers were also offering ex-wharf term deliveries at around $2 a tonne to Singapore quotes.

By contrast, spot ex-wharf premiums at the start of February were trading at about $4 to $5 a tonne above Singapore quotes, sources said.

In the cargo markets, demand for prompt deliveries was also lacking.

Buying interest for the actively traded 380-cst fuel oil in the Platts window on Tuesday was mostly concentrated at the back-end of the window with seven of the eight bids for the fuel seeking deliveries between March 19 to 23 at a relatively narrow discount of minus 50 cents to minus $1 a tonne to Singapore quotes, sources said.

By contrast, there was one bid for the 380-cst fuel for delivery at the front of the window, between March 8 and 12, seeking a cargo at a discount of minus $3 a tonne to Singapore quotes.

One cash deal totalling 20,000 tonnes of the 180-cst fuel oil was reported trading at parity to Singapore quotes.

Traders said they expected differentials to remain capped in the near term around current levels due to hefty arbitrage supplies into Singapore in February and, to a lesser extent, in March.

Total fuel oil flows into East Asia for February are expected to exceed the previous month's nine-month high of 7.3 million to 7.4 million tonnes, lifted by 11-month high Western arrivals, while March supplies are seen boosted by the expectation of yet another bull trading play, assessments by Thomson Reuters Oil Research showed.