SINGAPORE: The prompt-month time spreads of 380-cst fuel oil slipped to three-month low on Thursday despite a narrow decline in onshore Singapore inventories of the industrial fuel in a move that some traders said was drifting away from near-term fundamentals.
"Sure, we've had slightly above average arbitrage inflows in January but we're nowhere near a surplus (of supplies) that would push us towards contango," said a Singapore-based trader.
Traders pointed to fewer overall arbitrage flows into Singapore in February, compared to January, as well as generally tighter global supplies of the fuel that are expected to meet steady demand for the industrial fuel used in marine fuels and power generation.
Feb/March 380-cst time spreads were trading at parity to one another, the lowest level for the front-month contract since Oct. 14, after slipping 50 cents a tonne from the previous session.
This came despite a 180,000 barrel (or 27,000 tonne) drop in onshore Singapore inventories of residual fuels in the week to Jan. 25 to a three-week low of 21.83 million barrels (or 3.26 million tonnes), IE Singapore data showed on Thursday.
The decline in residual fuel stocks came as net imports of the fuel into Singapore shrank to a five-week low over the past week totalling 759,000 tonnes.
In physical markets, however, cash differentials of 380-cst fuel snapped three consecutive sessions of declines amid strong buying interest which lifted cash premiums of the fuel to 97 cents a tonne to Singapore quotes, up 52 cents a tonne from the previous session.
Four cash deals were reported in the Platts window totalling 60,000 tonnes of 380-cst fuel oil and 20,000 tonnes of 180-cst fuel, industry source said.
US INVENTORIES
Overall US residual fuel oil inventories across the five PADD regions rose to 41.427 million barrels in the week to Jan. 20, up 1.657 million barrels from the previous week, EIA data showed on Wednesday.
The US Gulf Coast PADD 3 region, an area with significant refining capacity, accounted for most of the inventory increase where fuel oil stocks grew by 1.309 million barrels for the week ended Friday to a total of 24.113 million barrels.
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