Soaring Asia prices draw supplies from Europe

www.gulf-news.com London |Reuters | 25-01-2003

Steamy fuel oil prices in Asia have pried open the arbitrage from Europe and at the same time drawn a provisional ultra large crude carrier (ULCC) booking from the Caribbean to Singapore, traders said.

Traders said exports from the West to Singapore, which had ground to a near halt in January after the Venezuelan strike ate into U.S. supplies, were slowly starting to take shape as players work to lock in paper profits.

"The east-west spread right now for March is around $27-28 and about $25 for February. Some people are starting to lock this in and look for the right freight and buyers in Asia," said one trader.

The east-west spread was trading at a narrow $5-6, just less than a week ago, but ballooned in the last few days following the twin effect of crumbling prices in northwest Europe and soaring prices in Singapore.

Traders said they have yet to see a January spot fixture from Europe or the Mediterranean to Singapore but most expect something to materialise in the coming days.

"The freight rates from the Med to Singapore are talked at around $20 a tonne, so based to the east-west spread, it is possible to move stuff to Asia," said one trader.

Exports from the region, including the Meditterranean, to Asia totalled almost a million tonnes in December but shipments plunged in January due to a combination of expensive freight and high prices in Europe.

Prices in Europe took off in January after icy weather stalled exports from the Baltic, which were exaggerated by strong demand from across the Atlantic as U.S. refiners looked to the region to cover shorts from Venezuela.

"It looks like the U.S. have covered a lot of their shorts and there's no big demand coming up. So people with excess oil are starting to look to Singapore again," said one trader. Shipping sources said that Swiss-based trader Trafigura had put the 350,000-tonner Berge Pioneer on subject for the trip from the Caribbean to Singapore.

They said the tanker, which was chartered at a cost of $4.5 million or $13 a tonne, would begin loading from refineries around the area in late January.

Traders said this was the probably only the second ULCC to make the long voyage from the Americas to Singapore laden with fuel oil.

They said if the shipment does work out, the cargo would arrive in Asia in time to meet an anticipated surge in Chinese demand following the Lunar New Year Holidays in early February.

Prices in Singapore have risen to over a two-year high with cash bids heard on Thursday at a high of $191 a tonne, compared to trades on the benchmark Rotterdam barge at $168 fob.