Asia’s refining margin for 180-cst fuel oil against Dubai crude rose to a 5-week high on Tuesday, after crude oil prices slipped on expectations of rising U.S. shale oil output in May.

REFINING MARGINS

Singapore’s May 180-cst fuel oil discount to Dubai crude narrowed for a second consecutive session on Tuesday, narrowing 22 cents a barrel from the previous session to minus $3.72 a barrel.

Oil prices hit their lowest in 11 days on Tuesday on news that U.S. shale oil output in May is expected to post the biggest monthly rise in more than two years, fuelling concerns that U.S. production growth is undermining efforts to cut oversupply.

ARBITRAGE ASSESSMENTS

Total fuel oil flows into East Asia for April are expected to close unexpectedly higher at 6.5 million to 7.0 million tonnes, lifted by unusually strong arrivals from the Middle East and Asia, assessments by Thomson Reuters Oil Research showed.

This comes despite below average Western inflows at under 4 million tonnes, just under the first-quarter average of 7.1 million to 7.2 million tonnes.

Despite expectations of elevated arbitrage arrivals, the May East-West (EW) arbitrage spread – the price difference between FOB Singapore 180-cst high-sulphur fuel oil and FOB Rotterdam barge fuel oil with maximum 3.5 percent sulphur – widened to a 5-week high of $23 a tonne.

SPREADS

Liquidity in the ICE traded 380-cst time spreads returned after remaining depressed over the previous two sessions by 1730 Singapore time (0930 GMT) on Tuesday.

Trading more than 200,000 tonnes in contracts, the front\\ month 380-cst May/June spread contract narrowed its discount by 20 cents per tonne from the previous session, to a 30 cents a tonne contango.

By contrast, the July/Aug and Aug/Sept 380-cst time spread contracts slipped on Tuesday.

WINDOW TRADES

11 cargo trades were reported in the Platts window on Tuesday totalling 220,000 tonnes of 380-cst fuel oil.

PetroChina was again the top buyer of 380-cst fuel oil, lifting 7 of Tuesday’s traded cargoes. Mercuria followed with another three cargoes and Hin Leong with one.

A total of 2.54 million tonnes of 380-cst fuel oil have traded in the window since the start of April.

Window trades were initially concluded at narrow discounts on Tuesday but bidding quickly intensified, helping nudge 380-cst cash premiums FO380-SIN-DIF 1 cent a tonne higher from the previous session to $1.08 a tonne to Singapore quotes.

TENDERS

The UAE’s ADNOC is offering up to 340,000 tonnes of straight-run fuel oil for delivery in June through four 85,000-tonne cargoes loading at Ruwais in a tender closing on April 20.