High sulfur fuel oil physical supply in on the rise in the Amsterdam-Rotterdam-Antwerp region in October due to a closed arbitrage to Singapore, the end of refinery maintenance and inflows from the Baltics, traders said.
Traders said that supply would rise sharply in the second half of October on the arrival of fresh material after stocks were depleted as a result of large arbitrage flows of HSFO to Singapore in September.
Around 1.6 million mt found a home in the Asian market in September, sources said.
"I think the market is returning to normal, we see more and more volumes coming into ARA," one trader said.
"There should be a better availability as lots of oil is coming to Rotterdam, but it depends how quickly people blend," another trader said.
European refineries' HSFO production was anticipated to pick up due to higher refining margins and strong interest in sour slate crude.
"I think the strength in October-November was overstated. Premiums are coming off and I am quiet bearish about supply fundamentals," the source said.
According to Platts data, the backwardation of physical FOB Rotterdam 3.5% barges over front month swaps narrowed sharply to $5.50/mt Tuesday, $6.75/mt from $12.25/mt Monday.
The outright price of physical barges fell $7.75 day on day to be assessed at $505.50/mt Tuesday.
Despite the HSFO barge derivatives backwardation steepening a touch on Tuesday, during midday trading on ICE Wednesday the structure narrowed reflecting physical traders' anticipation of greater availability for the rest of October, sources said.
The 3.5% FOB Rotterdam barge balance month/November swap was offered at $6/mt at 1045 GMT, having been assessed at $7/mt Tuesday.
