Singapore (Platts)--7Nov2012/434 am EST/934 GMT

The spot premiums for low sulfur fuel oil cargoes deliverable into Japan over Mean of Platts Singapore 180 CST high sulfur fuel oil assessments will likely remain rangebound at current levels until mid-December, trade sources said Wednesday.

LSFO cargoes for delivery into Japan for November have mostly been concluded at premiums of around $100/mt to MOPS 180 CST HSFO assessments, and this will probably be the level at which deals get closed for product shipped into Japan until at least mid-December, the sources said.

"Usually December is when we start to see demand pick up and end-users will have to buy in November [for delivery then], but this time around, buyers haven't really moved yet," a Tokyo-based trader said.

"Buyers are taking it easy at the moment. Moving into December, I hear that there is a spillover of inventories ... that the Japanese had secured for November ... so it seems they would rather clear their inventories first than buy more," another Japanese trader said.

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Petroleum Association of Japan data showed LSFO imports into the country for October rose 21.5% year on year to 4.47 million barrels, while the latest PAJ figures released Wednesday showed LSFO imports for the week ended November 3 had fallen 17.9% from a week earlier to 1.1 million barrels.

JX Nippon Oil and Energy Corporation, one of the largest buyers of LSFO for supply to Japanese utility companies, has so far bought at least six 30,000-35,000 mt LSFO cargoes for November delivery, according to market sources. It bought seven similar-sized parcels for October delivery.

"November is not a high demand season, yet buyers have bought many cargoes ... during the low demand period, JX would typically buy 3-4 [30,000-35,000 mt] cargoes. But then if you can buy and stock, now is a good time to buy. I think at least half of what JX bought for November will go into inventory," a Tokyo-based trader said.

JX officials were not immediately available for comment Wednesday.

Once peak winter demand season approaches in mid-December, a near absence of arbitrage barrels would lead premiums to inch up from current levels, trade sources said.

"I think premiums will remain between $100/mt and $110/mt until mid-December before they start going up ... with potentially no arbitrage cargoes coming from the West, the winter premium this year should come back up to $130-140/mt for mid-end February arrival barrels," a trader said.

--Rajesh Nair, rajesh_nair@platts.com --Edited by Wendy Wells, wendy_wells@platts.com

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