SINGAPORE: Asian fuel oil differentials fell on Monday partly because winter demand for power generation has yet to materialise, industry sources said.
Japan's has had a mild winter so far and overall oil demand in the country has also fallen over the years, leading to reduced imports of low sulphur fuel oil, they said.
"Demand has already changed structurally since a couple of years back as efficiency has improved," a Singapore-based trader said.
"Houses are using gas and electricity as well as double-paned windows."
There is ample inventory of heating oil so any spike in demand might not necessarily translate to more imports, the trader said.
Still, losses were limited because arbitrage volumes of fuel oil arriving into Asia from the West are expected to slow in December due to bad weather in the Black Sea and delays in the Caribbean, a second trader said.
Traders estimated that about 3.5 million tonnes of fuel oil were expected to arrive in Singapore in December. This will mean a pick up in arbitrage volumes in January, they said.
"Arbitrage (volumes) pick up again in January but weather delays might keep them a bit tight," the trader said.
He estimated that about 4.3 to 4.5 million tonnes of the fuel will be shipped into Asia in January and about 4 million tonnes in February.
Taiwan's Formosa Petrochemical Corp sold 40,000 tonnes of high sulphur fuel oil for Dec. 13 to 15 loading to Simosa at a discount of $20 a tonne to Singapore quotes, traders said.
The company also sold 15,000 tonnes of pyrolysis fuel oil to Mercuria at a premium of about $18 to $20 a tonne, they added.
TENDERS:
- Korea Western Power Co Ltd (WP) is seeking two cargoes of 45,000 tonnes each of high sulphur fuel oil, with a maximum sulphur content of 2.59 percent, for arrival into Pyeong Taek over Jan. 1 to 5 and Jan. 9 to 13. The tender closes on Dec. 11.
SINGAPORE CASH DEALS: Three trades reported.
- Glencore sold 40,000 tonnes of 380-cst fuel oil for Jan. 1 to 5 loading to Coastal Oil at a discount of $5 a tonne to the average of January Singapore quotes.
- Gunvor sold 20,000 tonnes of 180-cst fuel oil for Dec. 22 to 26 loading to Vitol at a discount of $3.50 a tonne to balance December average Singapore quotes.
- Gunvor sold 20,000 tonnes of 180-cst fuel oil for Dec. 22 to 26 loading to Mercuria at a discount of $4 a tonne to Singapore quotes.
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