Spread not enough. File Image / Pixabay.
With the cost of storing oil products sitting above the contango price in Singapore, players may well offload product into the market, according to SP Global Platts.
The contango market has future prices higher than current ones but in this case not by a high enough margin to cover the cost of storage.
Even the cheaper fuel oil storage option of using a tanker as opposed to land-based tanks, is above the current/forward price spread.
"VLCC rates have dropped, and storing costs are getting lower. But the current contango does not make economic sense," said a fuel oil trader was quoted as saying.
Stocks of fuel oil held in Singapore both on land and in ships are high, according to the report.