SINGAPORE: Asia's fuel oil crack for benchmark 180-centistoke rose on Monday, snapping three straight sessions of declines, amid uncertainty over the volume of arbitrage cargoes from the West next month and a drop in oil prices.
The crack rose to a discount of $6.75 a barrel on Monday after reaching its highest in more than three months on Nov. 17.
Between 3 million-4 million tonnes of oil is estimated to be on tankers heading East for arrival in December, traders said against earlier forecasts of 3.5 million tonnes.
That came as the spread for 180-cst rebounded to a discount of $3 a barrel on Monday after falling in the previous session. The spread strengthed to a discount of $2.75 a barrel on Nov. 19, its highest level in four months.
That compared with a discount of about $5 a barrel on Nov. 2.
Spreads had tightened because of fewer arbitrage volumes heading East from the West and good demand in some Asian markets including South Korea, said a Singapore-based trader.
"It's been surprising the spread has been so high. The fundamentals of a well supplied market have not really changed," said a rival Singapore trader.
Spreads could widen again by January as more arbitrage cargoes are expected from the West.
Refining margins in Singapore rose in the week to Nov. 20 on lower crude and freight costs, BNP Paribas said in a refining margin report on Monday.
Chinese imports of fuel oil fell 6.14 percent to 1.08 million tonnes in October compared with a year earlier, according to data on Monday from the General Administration of Customs.
Fuel oil imports for the first 10 months of this year fell 7.84 percent to 13.4 million tonnes, compared with the same period in 2014, the figures showed.
Low value products such as fuel oil are still quite challenged, Morgan Stanley in a report on Monday.
"Low refinery maintenance in December should help temporarily tighten up the market," the report added.
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