London (Platts)--17Dec2012/848 am EST/1348 GMT

FOB Northwest European 1% sulfur fuel oil cargoes were assessed at a $13.50/mt discount to equivalent front-month swaps Friday, their lowest differential in nearly four years.

They were last lower on January 1, 2009, at minus $16.50/mt, Platts data shows.

Traders describe a situation of increased supply in the region over the last month, against a backdrop of weak demand.

"[There's] no utility demand, poor bunker demand, and all refineries are back up from maintenance like Donges and Slagen," said one trader Monday. "So stocks built, hence the steep contango"

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As well as low physical premiums, the oversupply of LSFO is also being reflected in the swaps market, say traders.

The discount of front-month to second-month FOB NWE LSFO cargo swaps hit minus $6.50/mt on November 29, its lowest in the two years since October 15, 2010.

Since then, there has been a slight recovery in LSFO swaps, leaving the front-month/second-month spread at minus $4.25/mt as of Friday.

--Ned Molloy, ned_molloy@platts.com
--Edited by James Leech, james_leech@platts.com

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