European Fuel Oil Shipments to Asia Increasing 33% in March

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

25 Feb 2010

European fuel oil shipments to Singapore will increase 33 percent in March as traders take advantage of prices in Asia that have been driven higher by the region’s accelerating economic growth. Fuel oil, used to power ships or burnt to generate electricity, is moving east because of declining demand in Europe, according to a Bloomberg News survey of five traders, including companies involved in this arbitrage trade. An estimated 15 supertankers have been chartered to make the six- week journey to deliver 4 million metric tons in March, more than the monthly average of 3 million tons during the past year.
The Golden Victory was loaded around Feb. 15 in Rotterdam and is scheduled to arrive in Singapore on March 27, ship- tracking data on Bloomberg showed. BP, Europe’s largest oil company, placed the Front Tina on provisional charter after failing an initial booking for the Maersk Neptune for $3.9 million, based on a report yesterday from Simpson, Spence & Young Ltd., the world’s second-biggest shipbroker. Each vessel is a Very Large Crude Carrier able to carry up to 260,000 tons.
The increased supply has eroded profits. The premium of Singapore fuel oil swaps to Rotterdam barge prices have slipped below $20 a ton, from an average $30 in December, according to data compiled by Bloomberg. Based on freight rates of about $3.9 million for each VLCC, or $15 a ton, traders are pocketing profits of less than $5 a ton after operational costs such as financing and demurrage.
Quality Differences
The inflow of poorer quality, high-viscosity fuel oil, including Russia’s heavy Mazut M100 grade, has also increased a spread measuring quality differences, which is widely traded in the over-the-counter market. In Singapore, the premium of 180- centistoke fuel oil to 380-centistoke grade has climbed to $7.75 a ton, the highest since January 2009, said brokers PVM Oil Associates.
Since January, fuel oil inventories at Rotterdam, part of Europe’s independent storage hub with Amsterdam and Antwerp, have fallen to 577,000 tons, 38 percent below a record 935,000 tons. Over the same period, Singapore’s onshore stockpiles of residual fuels have increased 13 percent to 21.6 million barrels, or 3.3 million tons.
Globally, the number of vessels used as floating storage for crude oil and refined product fell 20 percent in January as the financial incentive to store supplies dissipated, Simpson, Spence & Young said earlier this month.

Source: Bloomberg