A total of 1.5 million tonnes of fuel oil have been fixed to land Asia in December, up from the year-low of 1.15 million tonnes a month earlier, industry sources said on Tuesday. The unexpectedly high volume for the month, which saw less than a million tonnes fixed by first-half November, was due to a frantic week of fixing following the opening of the East-West arbitrage window.
Players are also actively fixing January-arrival cargoes and the total for the month stands at about 1.2 million tonnes, to date, with more expected.
"December has been expected to be a low month with little selling interest and even less buying interest from China.
The heavy volumes that flowed into Singapore in October are still in the tanks and had been expected to be sufficient to feed the bunkers market," a Singapore-based fuel oil trader said.
"In any case, a total volume of 1.5 million tonnes is not terribly heavy and less than the monthly average of about 2 million tonnes a month. I think it balances out the high October volumes and low November arrivals."
More than half of the December arrivals are bunched up in the final week of the month and may be utilised in January.
About half of the December cargoes are high-viscosity 400-700 centistoke (cst) materials, which are typically blended into 380-cst for the marine fuels market.
However, the market is still heavily supplied with high-viscosity fuel oil, spilled over from the heavy October arrivals.
Singapore's onshore fuel oil inventory has been above 11 million barrels (1.7 million tonnes) for seven consecutive weeks.
Currently, the figure stands at 11.963 million barrels, for the week ended November 24, up 653,000 barrels from the week before.
"The consistently high inventories in a low supply month can only infer that the outflow was slow and a good amount of the cargoes stayed in the tanks," another trader said.
"This is consistent with the view that many of the players found it uneconomical to blend down their high-viscosity materials because blendstock costs were high, driven up by firm demand."
The heavy supplies are expected to be balanced by strong demand from the bunkers market.
Traditionally, November and December are the highest demand months for the Singapore bunkers market, which is expected to consume above record-high levels of more than 2 million tonnes each month.
Among the December-arrival cargoes include two Very Large Crude Carriers, Petco's Iran Harsin and European trader Tintrade's Iran Hengman, both from the Baltics with about 270,000 tonnes each.
Glencore and Brazil's Petrobras have fixed a Suezmax each, with 100,000 tonnes on board.
Glencore's Fun Island, from the Baltics, is expected to arrive around December 30.
The remaining cargoes for December will be delivered by eight 80,000-tonne Aframaxes, two 60,000-tonne Panamaxes and a 30,000-tonne Medium Range tanker from South Africa.
Given the arrival patterns, traders expect January to be a heavily supplied month.
"Most of the December-arrival cargoes will hit the market in early January.
January itself is quite spread out so far but the first half is going to be heavy," a trader with a Western trading house said.