Mercuria, PetroChina selling fuel oil stored offshore Singapore, Malaysia

Mercuria, PetroChina selling fuel oil stored offshore Singapore, Malaysia

Independent trading house Mercuria and Chinese state oil giant PetroChina
are selling fuel oil stored in vessels off Singapore and southern Malaysia
on strong demand from the shipping and power sector, several trade sources
said on Friday.

The number of vessels storing fuel oil has halved from a month ago as
Mercuria and PetroChina may have resold cargoes purchased over March to May,
the sources said.

Geneva-based Mercuria and PetroChina bought over 6 million tonnes of fuel
oil over those months in oil pricing agency S&P Global Platts' trading
period known as market-on-close (MOC).

Their deals made up nearly three-quarters of the volumes traded in that
period, according to data compiled by Reuters.

It is unusual for traders to store fuel oil in vessels when the market is
backwardated, a term used to describe a price structure where prompt prices
are higher than those in forward months, the sources said.

"Nobody floats when the market is backwardated as you can't cover the cost
of storage, so this is quite unusual," a Singapore-based fuel oil trader
said.

Mercuria did not answer calls to its Singapore office, while PetroChina did
not immediately respond to emailed questions.

The volumes the two purchased over March to May were stored in eight or nine
tankers, including very large crude carriers (VLCCs) and Aframaxes, traders
said.

The companies are now starting to resell the cargoes, and the number of
vessels storing fuel oil have reduced to about three or four VLCCs, another
Singapore-based fuel oil trader said.

Mercuria may have already resold all its cargoes, a trader with an European
oil firm said.

Demand for fuel oil for bunkers, or shipping fuel, has been healthy even
though sales dipped in May, the first Singapore-based trader said.

Singapore sales of marine fuels in May fell to 4.181 million tonnes, down
4.2 percent from a year ago, data from the Maritime and Port Authority of
Singapore (MPA) shows.

The cash premium of bunker fuel sold to ships, however, has been trading at
higher than usual levels, indicating that demand for fuel oil is still
strong, the first trader said.

The sales from storage also come ahead of an expected seasonal tightening of
exports from the Middle East as over the summer countries in the Gulf use
fuel oil for power generation as air conditioning use increases.

Margins for fuel oil in Europe have also outperformed cleaner fuels such as
diesel and gasoline following the OPEC-led decision to cut output, which has
limited supplies of heavier and sour crude oil grades that yield more fuel
oil, also cutting supply.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
http://af.reuters.com/article/energyOilNews/idAFL3N1JD2UD

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com