SINGAPORE, Jan 3 (Reuters) - Around 5.6 million tonnes of Western fuel oil have been provisionally booked to arrive in East Asia in January, the highest volume in 10 months, according to a Reuters survey of traders and shipping brokers.
This is 675,000 tonnes higher than December’s shipments, and the fourth consecutive month when volumes will be higher than 4.5 million tonnes, the survey showed.
The continued high inflows means the supply overhang that has hit the market since October will persist, traders said.
While demand in January and February was projected to be healthier due to winter requirements in North Asia, appetite has not been as robust as the same period last year.
“We can’t expect too much this winter ... I don’t see premiums shooting up as much as last year,” a fuel oil trader said.
The marine fuels market, which is the main outlet for fuel oil, has also experienced lacklustre demand for the past few months, with the shipping industry hurt by an uncertain economic outlook.
Reflecting the persistently weak sentiment, fuel oil’s prompt intermonth spread has remained in a contango structure since October, according to Reuters data.
In a contango market, front-month prices are lower than those in the future, indicating a weaker prompt market.
Around 4.05 million tonnes of shipments have been fixed so far to arrive in Asia in February, with the window for additional fixtures still open.
PetroChina was seen provisionally booking around 1.2 million tonnes of fuel oil from the Caribbean to China or Singapore.
Traders said that the supply glut may well persist as February is a short month. (Reporting by Lee Yen Nee; Editing by Himani Sarkar)