SINGAPORE Feb 6 East Asia is expected to
receive around 3.9 million tonnes of Western fuel oil in
February, the lowest since September, according to a Reuters
survey of traders and shipping brokers.
This is about 1.4 million tonnes, or 25.7 percent, lower
than January's shipments, the survey showed.
The lower volumes have lifted sentiment, with fuel oil's
prompt intermonth contango averaging around $2.65 a tonne so far
in the pricing month of February, down from $3.25 the previous
pricing month, Reuters data showed.
In a contango market, front-month prices are lower than
those in the future, indicating a weaker prompt market.
However, demand for fuel oil is lacklustre ahead of the
seasonal Lunar New Year lull, limiting gains in intermonth
"February is a short month and with the Chinese not buying
much, the bunker market still weak, 4 million tonnes can be a
lot of oil," said a trader based in Singapore.
An imbalance in arrivals of lower and higher viscosity grade
materials also saw the front-month viscosity spread falling
below $5.00 for the first time in more than 2-1/2 years at the
beginning of February.
The viscosity spread is the difference between the outright
prices of 180-centistoke (cst) and 380-cst fuel oil, and acts as
one of the indications of the blendstock balance in the market.
MARCH ARRIVALS AT AROUND 4 MILLION TONNES
Traders expect March arrivals to be steady at around 4
million tonnes, largely unchanged from February's volumes as
high freight rates are making arbitrage economics unattractive.
"The numbers don't look appealing at the moment, freight has
to be lower to make things work," a second trader said.
Reflecting the weak sentiment, the East-West spread has been
hovering below the $25.00-mark since the start of this month,
Reuters data showed.
To date, around 4.1 million tonnes of shipments have been
provisionally fixed to arrive in East Asia in March, with the
window for additional fixtures still open.
Out of the total volumes, PetroChina's bookings stood at
around 1.1 million tonnes, making the Chinese trader the biggest
(Reporting by Lee Yen Nee; Editing by Muralikumar Anantharaman)