Singapore Set for Tightening Fuel Oil Market

Floating fuel oil storage is now said to be almost empty

After a huge volume of fuel oil was traded in Singapore earlier in the year, supplies that had to be placed into floating storage are now almost empty having been moved into land-based tanks, according to data from Reuters.

And with low inventory in Europe and strong seasonal demand from the Middle East, analysts now predict a tightening market ahead for the world's biggest bunkering port.

"We are poised for some tightening of supplies in the East and that's why we're seeing some recent strength across the near-term time spreads," said Nevyn Nah, an oil products analyst at Energy Aspects.

"It also appears Western supplies are tightening, as is reflected in the fuel oil barge swaps, and the run cuts in Europe further denting supply will serve to limit the availability of replacement barrels."

Reuters notes that the average front-month time spreads for 380 cSt fuel oil narrowed to minus-83 cents in July, from minus-$2.89 for June, with August showing a slight improvement at minus-$1.25 as at last Friday.

Thomson Reuters Eikon data suggested the last of Glencore's floating storage vessels was unloaded at the end of July, having previously had some 24 vessels on charter storing around 3 million tonnes of product.

"Floating storage around Singapore is now looking pretty thin and the arbitrage window is still firmly shut, so we're more than likely to see notable draws of Singapore inventories, potentially leading to a backwardated market over the near-term," an unnamed Singapore-based fuel oil trader was quoted as saying.

Presumably contributing to the picture is that bunker sales at the port have also been particularly strong this year, having seen a record H1 total of 24,384,100 metric tonnes in sales for all products.

But news that Singapore's floating fuel oil storage has dwindled comes in apparent sharp contrast to crude, with Matt Smith, director of commodity research, ClipperData last week saying that "Singapore is this parking lot, and a lot of those crude cargoes do not have buyers."