HSFO Rotterdam Dec/Jan barges flip into backwardation on open arbitrage
Time：2014-11-28
Browse：121
The 3.5% FOB Rotterdam barge December/January swap moved 50 cents/mt higher, moving from a 25 cents/mt contango to a 25 cents/mt backwardation.
During mid-day trading on ICE the swap was bid at $1/mt, strengthening even as the East-West swap eased from levels seen earlier in the week.
“I think they need to buy Dec/Jan, [there`s] a lot of oil leaving the region and it’s the end of the month tomorrow… I guess they did not hedge everything or maybe [there are] new fixtures,” one trader said. Traders reported three VLCCs being fixed on the Rotterdam-Singapore route from the second half of November through to mid-December: the Fida by Vitol, Front Katherine by Totsa and the Wu Tei San by Petroineos, in addition to three Suezmaxes on subjects from the Baltics, sources said.
Singapore sources said that while flows of the Western material were large for December — estimated at 3.9 million mt — the market remained undersupplied.
“There is likely less rollover oil from November because some of them [suppliers] are already out of oil for this month,” a second source said.
“If bunker demand remains around 3.5 million-3.6 million a month then it’s actually a bit thin, ” a second trader said.
The collapse of OW Bunker has seen more restrictive credit terms and difficulties in opening the letters of credit now required to purchase oil by some traders, sources said.
This tighter credit was attributed to supporting Singapore premiums.
“The market is not tight but few are able to open Letters of Credit, so not a lot is moving,” a third trader said.
“I would say it looks balanced or veering towards a slightly tight market, but it depends how much demand comes through in the end, because of all the uncertainty surrounding credit issues here in Singapore after OW’s collapse,” the second source said.