Backwardation on the front of the US Gulf Coast 3%S fuel oil swap curve was assessed Thursday at its steepest in nearly four months on a lack of supply in the market, sources said.
At 3:15 pm EDT (1915 GMT), Platts assessed the balance-month September 3%S swap at $88.10/barrel and the October swap at $86.85/b. The $1.25/b spread between the balance-month and front-month swaps was its highest since May 13, when the backwardation was $1.35/b, Platts data shows.
The physical USGC 3%S assessment also moved to a $1/b premium to the balance-month 3%S swap, the highest the physical premium has been to the swap since June 13, when it was $1.13/b.
Several USGC sources have said that while demand has been low for most of the last month, on-spec 3%S fuel oil supply in the region has been difficult to acquire. One trader said Thursday that lighter crude inputs into refineries has meant less residual fuel oil in the market, which has put pressure on supply.
A second USGC trader said planned refinery turnarounds in the Gulf Coast have also been causing supplies to dwindle.
