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East-West fuel oil swap spread at widest on record, amid strong Singapore bunker demand

http://www.chemnet.com   Jan 27,2015 Platts
The price spread between FOB Singapore 180 CST high sulfur fuel oil and FOB Rotterdam barge fuel oil with maximum 3.5% sulfur, widened to a record high at Friday's Asian close due to a combination of strong Singapore bunker demand and ample supply in the European fuel oil market.

The front-month East-West fuel oil swap was assessed up $1.65/mt day on day at $40.95/mt Friday, January 23, the highest since the assessment was launched on October 1, 2014, data showed.

The spread has widened as Singapore fuel oil flat prices have strengthened since the beginning of this year amid firm demand from the end-user bunker fuel market.

As a result of the strong bunker demand, the Singapore fuel oil swaps market flipped into a backwardation for the first time this year on January 21, Platts data showed.


The prompt February/March swap spread for the FOB Singapore 180 CST HSFO grade was assessed at $1.60/mt 0830 GMT Asia close Friday, the highest since December 30, 2014, data showed.

On the other hand, the FOB Rotterdam fuel oil barge prices were weak, with the prompt intermonth swap spread still in contango -- the FOB Rotterdam February/March spread for the 3.5% sulfur fuel oil swap was assessed at minus $3/mt at 0430 GMT London close Friday.

Despite healthy fuel oil flows from Rotterdam to Singapore seen so far in January, the FOB Rotterdam 3.5% sulfur fuel oil barge market still had a supply glut, said sources based in Europe.

Healthy flows from Russia and cheap crude that attracted strong production output had resulted in the excess supply in the tanks at Rotterdam, said the sources.

"Rotterdam is long on fuel oil. Everyone is trying to find homes for the oil. We need [to fix] more VLCCs to balance the market," one European trader said.

While the East-West spread has widened mainly due to a bearish trend in the West and a firming Singapore market, some European traders also attributed it to a function of viscosity.
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