Asian fuel oil prices rebounded on Tuesday, snapping a six-day losing streak, but crack spreads fell below minus $15 for the first time in five sessions on increasingly heavy inflows and low demand.
The cash market saw a third-straight day of selldown, with Singapore trader Hin Leong selling three cargoes, totalling 60,000 tonnes, to Chinaoil, followed by more offers. As with the last two sessions, there were no bids and six offers as players, saddled with heavy inventories, sought to clear ullage.
Prices for the benchmark 180-cst grade rose by $7.80 to $349.50 a tonne, while the 380-cst grade went up $7.10 to $336.25. The physical differential for the 180-cst grade was at a discount of $5.00 a tonne, down a marginal 15 cents, on Hin Leong's outstanding offers.
The 380-cst differential fell another 50 cents to minus $6.25 a tonne on an offer by Westport, for 20,000 tonnes loading on August 9-13, at a discount of $6.00 a tonne to Singapore spot quotes.
The product's physical crack value was weaker at minus $15.65 a barrel, down 60 cents, while the front-month August crack swap was at minus $15.30, down 70 cents from Friday. Hin Leong, which had been offering aggressively in the cash market for the last three sessions, offered 20,000 tonnes for August 12-16, at $349 a tonne, equivalent to a discount of $5.15 a tonne to Singapore spot 180-cst quotes.
"I think Hin Leong's offers and deals have more to do with the fact that they really need to sell rather than any pricing interest, just like everyone else," a Singapore-based Western trader said.
"The supplies just keep coming and there's no outlet except for the bunkers market. The inflows are so heavy that it has even gone beyond the capability of the bunkers market to absorb." Singapore onshore fuel oil stock levels have swelled to 13.240 million barrels (2.04 million tonnes) last week, having stayed above the 12-million barrel mark for the past five weeks, and are expected to go higher this week.
Western arbitrage inflows for July totalled 3.4-3.5 million tonnes, the highest monthly volume in over two years, on the back of a similarly heavy June programme, with most cargoes expected to land from this week onwards.
Demand has been poor since the begining of the week, with price-sensitive Chinese buyers staying away from August-delivery parcels due to high outright prices.