NWE LSFO front-month/second month contango widest in almost two years
London (Platts)--12Nov2012/647 am EST/1147 GMT
Front-month FOB NWE 1% sulfur fuel oil swaps fell to a $4.75/mt discount
to second-month swaps Friday, their widest contango in almost two years.
The last time the front-month/second-month spread was in a contango of
$4.75/mt was December 13, 2010, Platts data showed.
Traders say that more low sulfur fuel oil supply coming to market as
refineries return from maintenance was a major driver for the steepening
"There is more supply coming from refineries, but I'm not sure demand
will increase at the same pace," a trader said, adding that he had not seen
as many barge or cargo deals done recently.
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"Demand is low in all areas and the market is generally long on all
[fuel oil] products," said a second trader.
However, some derivative traders said the contango might narrow this
week as liquidity rolled over in to the December/January contract.
"Singapore is the main curve driver. They are still very long [fuel
oil]," a swaps trader said, adding that the market would likely remain
bearish for the rest of the year.
In high sulfur fuel oil, the front-month/second-month 3.5% ARA FOB barge
swap was assessed at a contango of $3.50/mt Friday, its widest since November
"Russian runs are higher," one trader said, while other sources noted
that Russian exporters were taking advantage of "a prolonged mild spell" and
maximizing river exports to the Baltics while they could. At the same time,
arbitrage flows to Singapore were limited because of high inventories and
lack of demand, sources said.
--Marko Trtica, firstname.lastname@example.org
--Edited by Jonathan Dart, email@example.com