Asian oil product swaps showed big gains on Thursday, bolstered by a sharp overnight rise in US crude futures, but fuel oil's discount level to Dubai crude deepened due to heavy Western inflows. January fuel oil was quoted at $291.00 a tonne, up $6.75 from Wednesday.
The timespread between January and February fuel oil remained in a steep contango of $2.75 a tonne. The product also resisted crude gains, as seen in the weakening crack levels.
Fuel oil's January crack to Middle East Dubai crude widened to minus $8.61 a barrel from minus $8.30 a day ago.
East Asia is expected to receive a huge 2.8 million tonnes of Western fuel oil imports in January, the highest monthly volume since October 2004.
Traders expect the market to be overwhelmed with supply, in spite of seasonally high Chinese demand ahead of the Lunar New Year holidays. Brokers pegged January gas oil at $66.40 a barrel, a strong gain of $2.00 from the previous session.
The Singapore trader has already bought 1.5 million barrels of gas oil in the cash session over the past week. Gas oil's January/February backwardation was firm at 35 cents a barrel, and its January crack over Dubai gained 30 cents to $13.00 a barrel. January regrade, or the spread between jet-kerosene and gas oil, narrowed 20 cents to $5.30 a barrel in the face of pricing interests to dampen levels.
Benchmark NYMEX February crude traded up three cents at $59.85 a barrel by 0407 GMT, after Wednesday's gain of $1.66.