NWE HSFO contango deepens further to near 4-year low
London (Platts)--29Nov2012/827 am EST/1327 GMT
Contango in the Northwest European fuel oil swaps market is hitting
fresh lows, as traders struggle to see where new demand will come from to
absorb current output levels.
In high sulfur, front-month FOB Rotterdam 3.5% barge swaps were being
offered at a $5.00/mt discount to second-month swaps Thursday morning, down
$1.00/mt from Wednesday and lower than any daily Platts assessment since
January 9, 2009.
"On [European] time-spreads I'm not surprised, as Singapore has been
building up weakness," said one trader Thursday. "Singapore stocks are
growing, buy they're not anywhere near to tank top."
In the NWE low sulfur fuel oil swaps market, the contango structure
deepened further Wednesday, with front-month FOB NWE 1% sulfur cargo swaps
assessed at a $6.25/mt discount to second-month swaps, its lowest in over two
years. The last time LSFO paper contango was lower was on October 15, 2010,
at minus $6.50/mt, Platts data showed.
Article continues below...
|Request a free trial of: European Marketscan|
European Marketscan delivers everything you need to gain a full and clear 360 degree view of the European oil products market each business day. European Marketscan is the tool used by all the major players in the oil market. It provides trusted, reliable and comprehensive coverage of European refined oil product markets and ensures you are kept up to date with the driving forces behind the latest changes in key product prices.
Traders said LSFO supply in Europe was high and growing, due to the
return of key LSFO-producing refineries from maintenance this month,
including Valero's Pembroke refinery in Wales, Exxon's Slagen refinery in
Norway, and Shell's Pernis refinery in the Netherlands.
"People are putting stuff [LSFO] into storage rather than offering
cargoes into the market," said one trader.
Meanwhile, many couldn't see where demand could come from in December,
typically a time of lower bunker demand.
The less liquid barge swap market has followed the cargo swap structure
to its deepest contango in over two years. Front-month FOB Rotterdam 1% barge
swaps reached a $6.50/mt discount to second-month swaps Wednesday, a low last
seen on October 15, 2010.
LSFO buying for power generation purposes tends to increase in the
winter months, but has yet to pick up, traders said.
--Ned Molloy, email@example.com
--Marko Trtica, firstname.lastname@example.org
--Edited by Jonathan Fox, email@example.com