"Too Much Oil" in Rotterdam Fuels Singapore Arbitrage

Litasco confirmed it had nearly finished loading 270,000mt of IFO 180 aboard the Front Katherine bound for Singapore

Bunker traders Tuesday were said to be looking for Suezmaxes to take IFO 180 heavy fuel oil (HFO) from Rotterdam to Singapore as the price disparity between the locations offers arbitrage, Platts reports.

According to the report, the front month IFO 180 East/West swap has widened to $38 per metric tonne (mt).

On Monday, Ship & Bunker data showed spot prices for IFO 180 were $17.50 higher in Singapore than Rotterdam.

The arbitrage is understood to be driven by a glut of IFO 180 at Rotterdam, with traders saying they are awash with produce.

"There is just too much oil," said a fuel oil trader for Litasco, who confirmed that the company had nerly finished loading a cargo of 720,000mt of product aboard the very large crude carrier (VLCC) Front Katherine.

Another trader said "we've been able to source relatively cheaply."

"There's plenty of oil going [to Singapore]."

According to the report, an almost complete lack of available VLCC capacity has led traders to look for Suezmax tankers to transport cargoes, despite the extra expense.

"Every man and his dog is looking [for Suezmaxes] in Rotterdam now," said one shipbroker.

VLCC rates for the Rotterdam-Singapore voyage were said to have hit $5.4 million for a cargo of 270,000mt up from $4.7 million last week, whereas Suezmax rates for a 130,000mt cargo on the same voyage, are said to be down $300,000 since last week at $3.3 million.

According to the report, the falling rates for Suezmaxes have made that option more viable.

This month, Litasco was said to be poised to sell its 242,000 cubic metre Rotterdam HFO storage facility to UK investment firm iCON Infrastructure Partners.