MARKET TALK: Asia Fuel Oil: Spreads Firm; Inventories Dip
[Dow Jones] Asia fuel oil spreads strengthen a bit as the market consolidates in the wake of heavy profit-taking over the previous week that shut the arbitrage window, slowing booking activity. Solal fully fixes a Navig8 Aframax for Feb. 18 loading from Kerch to Singapore at $2.80 million. Despite narrow backwardation and lower VLCC rates, the sudden collapse in East-West economics leaves only a few players still able to make arbitrage moves. Singapore inventories slip after two weeks of heavy buildups; outflows have been brisk--especially to China, Japan and Taiwan--balancing the recent heavy inflows. Narrower backwardation also gives big-volume movers like Litasco a chance to replenish inventories ahead of a recovery in spreads. Farther out in the curve, April/May remains in deep backwardation at $6.75/ton.
The prompt February/March spread is largely steady at $8-$8.50/ton in backwardation; more buying interest is seen in March/April, which will become prompt early next week; March/April widens to around $8/ton in backwardation.