SINGAPORE: Fuel oil supply shipped from the West for arrival in Singapore in July is expected to hit a two-month low, though thin demand could limit any gains due to tighter supply, a survey of shipping and trade sources showed.
An estimated 2.96 million tonnes of fuel oil should reach Singapore in July from Europe and the Americas, 4.2 percent less than in June, Reuters analysis of shipping data showed.
Total fuel oil supplies into Asia are estimated at 3.09 million tonnes for July, more than 20 percent below this year's monthly average, according to the data. Poor marine fuel sales and regional demand, however, could mitigate any bullish sentiment arising from the drop in supply, traders said.
In Singapore, for instance, marine fuel sales in May slipped around 5 percent from April to 3.64 million tonnes, data from its port authority showed.
While the window to send cargoes from Europe eastwards to Asia is still open for approximately another two weeks, traders said any increase in barrels would be marginal.
"The local markets in ARA or the US are tight as well ... thus the arb is well-closed," said a Singapore-based trader.
ARA refers to western Europe's main oil hub consisting of Amsterdam, Rotterdam and Antwerp.
Production of fuel oil is expected to be lower as refining rates in Northwest Europe and the Mediterranean region are set to drop around 15-25 percent this summer, amid soaring crude prices and collapsing profits.
Higher freight rates have also hampered the flow of cargoes from the West into Asia, traders said.
To ship 270,000 tonnes of oil from Rotterdam to Singapore costs about $3.4 million, and from the Caribbean to Singapore about $3.55 million, up from $3.2 million and $3.45 million, respectively, from the week before, according to a shipping source.
Asia will receive about 1.89 million tonnes (61 percent) from the United States and the Caribbean; 670,000 tonnes (22 percent) from the Black Sea; 400,000 tonnes (13 percent) tonnes from Europe; and 130,000 tonnes (4 percent) from the Baltics.
Of the fuel oil cargoes heading towards Singapore, trade sources said very large crude carrier (VLCC) Achilleas, chartered by Chinese state-trader Unipec, may be destined for arrival in China instead. That could reduce the fuel oil volumes available in Singapore by about 270,000 tonnes.
JUNE ARBITRAGE
About 3.48 million tonnes of fuel oil will arrive in Asia this month, 12 percent higher than initial estimates, due to delays in the arrival of two VLCCs (Overseas Mulan and Maersk Noble), Reuters analysis of shipping data showed.
Of the fuel oil volumes set to arrive in June, about 390,000 tonnes (11 percent) will reach China and South Korea.
Most of the fuel oil into Asia will come from the United States and Caribbean at 2.47 million tonnes or 71 percent, 15.5 percent will come from Europe, and 9.8 percent and 3.7 percent, respectively, from the Black Sea and Baltics.
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