The backwardation in the prompt Rotterdam high sulfur fuel oil barge swap market widened at least $1.75/mt early Friday on the expectation of resumed arbitrage flows from the key European hub to Singapore, fuel oil traders said, though no fixtures have yet been reported.
The January/February HSFO barge spread traded as steep as $4.25/mt backwardated at about 1205 GMT Friday, up $1.75/mt on Platts Thursday assessment. At 1220 GMT the market was heard to be bid at $4.00/mt and offered at $4.50/mt.
The spread has been rising slowly all week due to a tight prompt market, fuel oil traders said. On Monday, the spread was assessed in $1.75/mt backwardation, climbing to $2.50/mt over the course of four days, according to Platts data.
However, Friday morning's relatively large rally is on expectations of arbitrage movements, market participants said.
"The market anticipates VLCC movements," a trader said. "There are some fixtures in early January and Singapore strength is rolling forward," he said.
While no fixtures have yet been reported, the sentiment, coupled with a firm Singapore market has caused HSFO barge spreads to rise, traders said.
Singapore is a key import location for Rotterdam HSFO and so moves on the Singapore market will often affect the Northwest European complex.
"The structure in Singapore has firmed and it has a knock-on effect," the trader said.
The backwardation in the key 180 CST Singapore paper market widened Friday. The January/February 180 CST spread was assessed in $9.30/mt backwardation, $1.50/mt wider than the previous day, according to Platts data, with Singapore traders attributing the move to expectations of lower than anticipated January imports.
