Asia/Pacific News
Buy and Sell Frenzy in Singapore Market is First Big Bunker Battle of 2016: Reports
Aggressive buying by Glencore and PetroChina on the heels of strong selling by other sources is amounting to 2016's first big battle in Singapore's fuel oil market, according to reports.
The volumes traded so far this month in Platts' Market-on-Close (MoC) price assessment process, which establishes most crude and petroleum product benchmark prices traded daily in Asia, are the largest since nearly 6 million tonnes was processed in June of 2015, according to data from Reuters.
A total of 3.48 million tonnes of fuel were traded on the MoC between March 1-15, with Glencore taking 57 percent of that volume and PetroChina accounting for almost a third.
On March 9 alone, 620,000 tonnes of fuel oil changed hands, which in turn boosted 380 cSt physical cargo premiums.
This follows a frantic February, when approximately 1.18 million tonnes of fuel were traded, most of it in the second half of the month, with sellers Russia's Lukoil, France's Total, and private merchant Gunvor offering steep discounts.
An unnamed Singapore trader told Reuters that the buying activity has caused April-May spreads to strengthen from a $3-$4 per tonne discount range to around $1-$2 last week.
Analysts are especially concerned that the trading has pulled the fuel oil price curve into backwardation: Tushar Bansal, senior consultant at Facts Global Energy, points out that "Market fundamentals don't justify a near-term backwardated market."
Indeed, the backwardation implies tight supply for immediate deliveries, even though Singapore inventories are at record levels and Asia's short-term fuel market is secure.
Last June, Singapore caused major commodity houses to bet against each other when over $750 million worth of fuel oil was traded during the first week of that month, about 60 percent of Singapore's average monthly sales.
