Asia/Pacific News
Singapore Sees Unprecedented Trading Volumes and Fuel Oil Trading Houses "Betting Against Each Other"
Singapore saw over $750 million worth of fuel oil traded during the first week of June, about 60 percent of Singapore's average monthly sales, causing major commodity houses to bet against each other on the direction of fuel oil in, Reuters reports.
With an average daily trade volume of 500,000 tonnes, June is already set to break the October 2013 Singapore record of 3.175 million tonnes of 380 cSt fuel oil.
The reported “trading frenzy” is said to be testing whether Singapore’s port logistics can manage such huge volumes.
“This time round it's a serious play," said one veteran oil trader in Singapore.
Reuters says buyers have flipped the benchmark 380-cst fuel oil differential FO380-SIN-DIF from a discount of $6.33 a tonne to Singapore spot quotes to a $7 a tonne premium in just 10 trading days, the biggest two-week gain on record.
Trading volumes are said to have been spiked due to a hot summer in the Middle East, which means more demand for fuel oil to run air conditioners, limits exports to Asia, thereby driving up prices as well.
Traders were cautioning that the surge in buying could face pressure from a potential release of stocks as individual companies face storage shortages.
IE Singapore data showed that onshore fuel oil stocks have risen to 27.6 million barrels, or about 4.25 million tonnes, across 13 refinery and commercial terminals in Singapore, their highest since the beginning of record in 1999.
Additionally, with the reported limited space at Singapore's oil terminals, some are concerned that overcrowding could cause barriers to loading and discharging.
"Jetties' schedules in Singapore are already very tight, any incremental volumes will strain logistics very badly," said an oil terminal representative in Singapore.
In May, the Maritime and Port Authority of Singapore (MPA) signed a $1.83 billion deal to construct a new port terminal, set to be completed within six years.
