Asia Fuel Oil-Firms for 2nd session, recovery expected

(Reuters' expanded Asia Oil Swaps Forward Curve coverage includes the East-West component. For
more information: )	
    SINGAPORE, Feb 23 (Reuters) - The Asia fuel oil market strengthened for a second
straight session on Thursday, as revived buying sentiment led to heavier trade volumes of more
than half a million tonnes in the prompt three timespreads.	
    The rebound pushed fixed-price levels to a second straight more-than three-year high, with
levels for the benchmark 180-centistoke (cst) grade at $745.10, its highest since July 2008, and
more significantly the same month when global crude benchmarks hit all-time levels of about
$147.00 a barrel.	
    "The market is by no means weak, despite the front timespreads losing about 70 percent of
its value in the past 2-3 weeks. It just went from insanely-strong to still-strong," a
Singapore-based Western trader said.	
    "And it seems most players believe that the market has bottomed out last Friday and is on
the way back up, even ignoring the swelling inventories that are at its highest since last May."	
    Singapore stock levels soared to a 40-week high of 21.7 million barrels (3.3 million
tonnes), up about 10 percent from week-ago levels, official data showed. 	
    Traders said the market has priced in the inventory surge, which came on the back of
record-high inflows for this month at around 6.5 million tonnes into East Asia, which was one of
the main reasons for its drastic fall in the past 2-3 weeks. 	
    The front-month timespread has lost nearly 70 percent of its value since end-January, with
March/April falling to a five-month low of $4.38 a tonne, before recovering to close at $5.25 on
Thursday, amid steady trade volumes of about 200,000 tonnes.	
    The fall had also been exaggerated by easing demand for straight-run fuel oil from China as
teapot refiners were put off by rising fixed-price levels, and Russian major LUKOIL's sustained
bear trading play.	
    Its trading arm, Litasco, has sold more than 4.0 million tonnes of swaps since January,
adding another 130,000 tonnes of mostly fixed-price March 180-cst and 380-cst contracts on
Thursday.	
    It also has four Very Large Crude Carriers (VLCCs), all loading on-specification
bunkers-grade 380-cst from the Amsterdam-Rotterdam-Antwerp (ARA) region, and a 130,000-tonne
suezmax arriving in Singapore, bearing 1.2 million tonnes within a short three-week period from
March 1.	
    Traders attributed the market's improved sentiment to the belief that the Chinese demand
will return once fixed-price levels ease from their current highs, or if the Chinese government
raises state-controlled gasoil and gasoline prices. 	
    The expectation of lower inflows for April and continued firm demand from Japan for
low-sulphur barrels for power-generation, amid a harsh winter and loss nuclear capacity, have
also kept sentiment up.	
    April-arrival Western arbitrage bookings are notionally at about 3 million tonnes so far,
amid slower tanker-fixing activity.	
    Three new bookings were seen - the 270,000-tonne Pacific Glory for March 9 loading from
Rotterdam, the 130,000-tonne Sonangol Kassanje for Feb. 29 lifting from the U.S. Gulf Coast by
Shell, and the 80,000-tonne Eagle Augusta, for Feb. 29 loading from Colombia by Spain's Repsol.	
    (Table of Western arbitrage fixtures: )	
    	
    SWAPS SPREADS: March/April strengthened 25 cents to a backwardation of $5.25 a tonne by the
Asian close at 0830 GMT, with 210,000 tonnes traded at $5.15-$5.75 a tonne, down from 280,000
tonnes previously. Bids/offers were last seen at $5.00/$5.50 by 1130 GMT. 	
    At least 190,000 tonnes of April/May were traded at $5.75-$6.15, another 220,000 tonnes of
May/June at $6.00-$6.25, 75,000 tonnes of June/July at $5.75-$6.05, and 105,000 tonnes of
July/August were done at $5.40-$5.50 a tonne.  	
    Another 225,000 tonnes of Q2/Q3 were traded at $16.75-$17.25, while 15,000 tonnes of Q3/Q4
were done at $14.75 a tonne.	
    One 5,000-tonne lot of March/April 380-cst changed hands at $5.50, while 10,000 tonnes of
March viscosity were traded at $11.50 a tonne. 	
    	
    SWAPS OUTRIGHTS: The March and April 180-cst swaps were valued at $738.75 and $733.50 a
tonne respectively, up $3.75-$4.00 or around 0.5 percent. 	
    At least 85,000 tonnes of March were traded at $737.25-$738.75, down from 100,000 tonnes
previously, with offers last seen at $743.25 by 1130 GMT. 	
    Another 185,000 tonnes of March 380-cst were traded at $725.50-$727.50, while 5,000 tonnes
of April were done at $5.50 a tonne. 	
    For swaps trades, click 	
	
    EAST-WEST SPREADS: The East-West March spread widened 75 cents to $40.00, while April edged
up 25 cents to $38.25 a tonne. At least 5,000 tonnes of the March contract were traded at $40.00
a tonne. 	
    	
    SWAPS CRACKS: March's crack inched up a cent to a discount of $5.60, while April discount
widened 7 cents to $5.74 a barrel, amid April Brent gaining $1.21 to $122.94 a barrel by
the Asian close.	
    	
    CARGO PRICES AND DIFFERENTIALS: The 180-cst grade rose $3.50 to $745.10 a tonne, while the
380-cst grade was $2.60 higher at $732.20, both highest since July 2008. The differential for
the 180-cst grade eased 50 cents to $6.35, while the 380-cst premium fell to a five-month low of
$5.25, down 95 cents.	
    	
    TENDERS: Saudi Aramco sold 90,000 tonnes of 380-cst, for March 15 loading from Jubail, to BP
at a discount of $6.00-$7.00 a tonne, on free-on-board basis. 	
    It is also offering 45,000-50,000 tonnes of 380-cst, for March 15-16 lifting from Jubail,
via tender which closes on Feb. 29, with one-day validity. 	
    	
    CASH DEALS: Two 380-cst and two 180-cst deals.	
    Lukoil sold 20,000 tonnes of 380-cst, for March 9-13 lifting, to Hin Leong at a premium of
$5.50 a tonne to Singapore spot quotes.	
    The other 20,000 tonnes of 380-cst was sold to Brightoil by Kuo Oil, for lifting on March
20-24, at a premium of $6.25 a tonne to Singapore spot quotes. 	
    Both 180-cst cargoes were sold by PetroChina. The first 20,000 tonnes, for March 14-18
lifting, went to Mercuria at a premium of $6.00 a tonne to Singapore spot quotes. 	
    Vitol bought the other 20,000 tonnes, for lifting on March 20-24, at a premium of $7.00 a
tonne to Singapore spot quotes.
	
	
    BUNKERS: The Singapore bunker differential, the price spread between ex-wharf marine fuel
prices and fuel oil cargo values, lost 60 cents to a premium of $7.80, with bunker prices at
$739.00-$741.00, up $2.00.	
    	
 PRODUCT                  RIC             BID     ASK     MEAN    PREV    CHANGE   % CHANGE
 FO 180 CST SPOT          FO180-SIN       745.00  745.20  745.10  741.60  3.50     0.47
 FO 380 CST SPOT          FO380-SIN       732.00  732.40  732.20  729.60  2.60     0.36
 Singapore Bunker         BK380-B-SIN     739.00  741.00  740.00  738.00  2.00     0.27
 380 CST Bunker Premium                   7.00    8.60    7.80    8.40    -0.60    
 FO 180 Month 1 Swap      FO180SGSWMc1                    738.75  734.75  4.00     0.54
 FO 380 Month 1 Swap      FO380SGSWMc1                    727.13  723.38  3.75     0.52
 FO 180 Diff              FO180-SIN-DIF   6.00    6.70    6.35    6.85    -0.50    -7.30
 FO 380 Diff              FO380-SIN-DIF   5.00    5.50    5.25    6.20    -0.95    -15.32
 	
 (Reporting by Yaw Yan Chong and Lee Yen Nee; editing by James Jukwey)