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Amount of Western Fuel Oil Arriving in Asia Is Largest Ever in November

Western fuel oil arriving in Asia in November surged to 3.6-3.8 million tonnes, the biggest monthly volumes on record due to a jump in exports from Russia and the Carribean, traders and shipping brokers said on Tuesday

Amount of Western Fuel Oil Arriving in Asia Is Largest Ever in November

Western fuel oil arriving in Asia in November surged to 3.6-3.8 million tonnes, the biggest monthly volumes on record due to a jump in exports from Russia and the Carribean, traders and shipping brokers said on Tuesday.

The hefty November volumes, up a third from October levels of 2.8 million tonnes, came at a time of easing Asian demand, they said.

The shipments for this month also doubled the 1.84 million tonnes of Western imports in November 2007. The shipments in December so far were seen at 2.1-2.3 million tonnes.

"There is an increase in supply from Russia and the Caribbean," said a fuel oil trader.
The Russian government cut oil export duties on Nov. 1, responding to the concerns of top producers who feared making losses on overseas shipments.

"That reduction on export tax encourages exports," said a second trader in Singapore.

But the cut in the tax from $373.20 to $287.00 a tonne, was far less than the Russian oil companies had wanted.

With European refiners returning from maintenance, supplies are set to increase further.

The record Western volumes were a reversal of the paltry volumes of the past few months when exports from Europe were squeezed by a slew of refinery run cuts, amid weak margins, and on competing demand from the booming Middle East.

Western fuel oil arrivals into Asia fell to 417,000 barrels per day (bpd) from June to September, compared with 802,000 bpd for the November cargoes.

Fuel oil stocks in the Singapore oil hub have already swelled to a 14-week high of 20.278 million barrels last week on the steadily rising Western inflows.

Fuel oil trading in Singapore widened to a discount of $13.15 a barrel versus Dubai crude, from minus $12.43 a day ago on signs of growing supplies.

The Asian market is already facing shrinking demand especially with China holding back spot purchases amid low operating rates among the independent teapot refiners and factories cutting operations.

"The market has been weak. Bunker demand has also slowed because of the recession," said another trader, referring to lower sales in Singapore.

The outlook is turning bleak for fuel oil -- the dirty dregs of a barrel of oil used mostly for power generation and to drive ships -- as the financial crisis deepened around the globe.

Evidence of a weakening Chinese economy, feeble data from Australia and Britain and a darkening corporate outlook in the United States reinforced fears of a prolonged global recession.

China's inflation fell to a 17-month low of 4 percent in October, while trade figures were expected to show slowing imports, both serving as signs of a cooling economy and dampening hopes that China's growth will help cushion the impact of the global downturn.

"Fuel oil demand is really bad but people are still throwing cargoes into the market. Plus freight rates are low," a trader said.

Author: Jo Amey


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