Asia Fuel Oil-Viscosity spread stays below $6 – lowest since April

Time:2014-07-02 Browse:53 Author:RISINGSUN
The viscosity spread, which is the premium that the 180-cst fuel oil swap commands over the more viscous 380-cst grade swap, remained unchanged at $5.75 a tonne on Tuesday, hovering around its lowest level since April.

The $5.75 a tonne level was reached last Thursday and has held around this level since, butit is a steep fall from its multi-month highs in May of above $12 a tonne, Reuters data showed.

Traders said this could due to relatively lower arbitrage volumes from the West and hence,lower demand for the 180-cst as a cutter stock.

Heavy fuel oil cargoes, particularly from the United States and Caribbean, need to be
blended with less viscous material to produce fungible fuel oil that can be traded in Asia.

Around 1.89 million tonnes of fuel oil will arrive from the Americas in July, lower by morethan 20 percent than June, Reuters analysis of shipping fixtures showed.

Overall, the market outlook in the short term appeared to be under pressure.

“With flat prices sustaining at such high levels, shipowners are hesitant to buy much fuel,”

said an Asia-based source. “Cracks will not improve unless flat prices come down.”

Cracks is the price difference between crude and oil products, which represent the
profitability of producing a certain product.