SINGAPORE: Asia's fuel oil crack for benchmark 180-centistoke was at its narrowest discount to Dubai crude in about eight months at $3.19 a barrel on Tuesday, lifted by tightening inventories in key storage hubs as well as steady demand for the industrial fuel, industry sources said.
"Overall, (fuel oil) inventories in Singapore, ARA (Amsterdam-Rotterdam-Antwerp) and the US are lower now compared to last year and arbitrage opportunities into Singapore have until recently been more or less shut," a Singapore-based trader said.
Onshore inventories of Singapore fuel oil last week slipped to 21.584 million barrels (about 3.22 million tonnes), slightly above their 2016 low of 20.559 million barrels (or 3.07 million tonnes) in the week to Aug. 31, official data showed.
Meanwhile, fuel oil stocks independently held in the Amsterdam-Rotterdam-Antwerp oil hub fell to 722,000 tonnes in the week to Sept. 15, their lowest since March 2015, data from Dutch consultancy PJK International showed.
The last time fuel oil cracks were narrower was on Jan. 26 at minus $2.55 a barrel.
"The refinery maintenance season could also be boosting cracks," a second Singapore-based trader said.
However, other traders were not so convinced.
"Doesn't make much sense to me, arbitrage volumes into Singapore have been recovering over the past couple of months and there are sufficient replacement barrels coming here," a third Singapore-based trader said.
According to Thomson Reuters Supply Chain and Commodities Research, total fuel oil flows into East Asia for September have been pegged provisionally at 5.4 million to 5.6 million tonnes for the week ended Sept. 15, up nearly 5 percent from August but still well below the year-to-date monthly average of 5.94 million tonnes.
By comparison, total July inflows were assessed at 3.4 million to 3.5 million tonnes, the lowest in just over four years.
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