SINGAPORE: Asian fuel oil differentials and time spreads narrowed slightly on Monday, although traders said the more positive mood could be short-lived as more volumes arrive from the West in the coming weeks.
The Feb/March time spread contract for 380-cst fuel oil narrowed to zero on Monday from minus 75 cents a tonne on Friday.
There was just one trade reported in the Platts window after PetroChina bought 20,000 tonnes of 380-cst high sulphur fuel oil from Shell at zero discount to Singapore prices.
The time spread for 180-cst narrowed to minus $4.15 per tonne from minus $4.82 the previous session.
Differentials for 180-cst fuel oil narrowed to minus 17 cents a tonne below Singapore quotes, a 66 percent increase on Friday. Those for 380-cst heavy fuel oil were virtually unchanged.
"There is slightly more upbeat sentiment today, but people are also waiting on the sidelines for prices to gain some direction," said one Singapore-based trader.
Meanwhile bunker prices fell, despite the gain in other prices on Monday.
"It's strange how bunker prices are still coming down," said a second Singapore-based trader.
Bunker prices could come under further pressure later this month with the arrival of more arbitrage supplies from the West.
Lower freight rates for supertankers had opened the arbitrage trade for fuel oil shipments to Asia, Norwegian ship broker Fearnley said in a note.
Charter rates for Very Large Crude Carriers (VLCCs) from the Middle East to Asia, which have more than halved to around $30,500 per day on Friday from $69,468 per day on Dec. 20, freight data on the Reuters Eikon terminal showed.
Fuel oil inflows to east Asia are expected to be around 5 million tonnes in February, compared with 7 million tonnes in January, assessments by Thomson Reuters Oil Research showed. But traders thought the volumes could be higher.
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