The Mediterranean fuel oil swaps market has risen on worries that supply in January will tighten due to a recent open arbitrage to Asia.
The balance-month Med/North swap -- the price difference between high sulfur fuel oil FOB Mediterranean cargoes and FOB Rotterdam barges -- was heard traded as high as minus $1.75/mt Thursday, up from minus $5/mt on Wednesday.
This coincided with a surge in the physical Med/North differential, with the Med moving to a $2.25/mt discount Thursday, up from a $12.50/mt discount on December 8.
The high sulfur fuel oil arbitrage to Asia opened up from the Mediterranean in the first decade of December due to an overhang of supply.
But after two Suezmaxes left for Asia, supply on the prompt began to tighten, sources said.
"People are panicking," said one swaps trader.
The Physical 3.5% sulfur FOB Mediterranean cargo outright price was assessed at $132/mt Thursday, the lowest since December 2008 due to sharply lower crude oil prices.
