Asia fuel oil prices fell on Monday, in tandem with lower crude, and the inter-month contango widened slightly in thin trade, as demand remained sluggish amidst a deteriorating outlook for the global economy. Regional bunker demand has slowed as shipping declines in line with falling trade and manufacturing activity.
Demand from China, Asia's largest fuel oil importer, has slowed to a trickle after the buying rush ahead of the country's January 1 fuel consumption tax hike eased and large stockpiles weighed on sentiment. But the market remains fairly well-supported as supplies from North Asia and the Middle East decline and as March arbitrage inflows from the West are expected to be flat to slightly higher from February's levels.
February arbitrage flows from the West likely fell to 2.7-2.9 million tonnes, from 3.5-3.6 million last month, while March cargoes from the West are estimated so far at 2.9-3.3 million tonnes, shipping brokers and traders said. South Korean and Middle Eastern flows are shrinking as these countries retain supplies for domestic utilities and power generation over the winter.
SWAP SPREADS: Cracks narrowed slightly to minus $5.60 a barrel from minus $5.75 a barrel on Friday, while the February/March contango widened to $1.50 a tonne from $1.25 a tonne on Friday.
BIDS: No bids were made, indicating thin buying interest.