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Asia Fuel Oil Rises to 26-Month High; Refining Profits Slip: Oil Products

By Yee Kai Pin - 2010-12-06T04:17:40Z

Asian fuel oil and gasoil swaps rose for a third day to the highest in 26 months. Product crack spreads narrowed in Singapore, Asia’s biggest oil-trading and storage center, signaling reduced refining profit.

Benchmark crude futures in New York also traded near a 26- month high above $89 a barrel on speculation a U.S. economic recovery would bolster fuel demand.

Fuel Oil

High-sulfur fuel oil swaps for January rose $1.75, or 0.3 percent, to $513.25 a metric ton at 12 p.m. Singapore time, according to data from PVM Oil Associates, a brokerage. That’s the highest since Oct. 3, 2008. The product’s discount to Dubai crude, the Asian bellwether, widened 75 cents to $9.14 a barrel, indicating losses from making the residue were the most since March 2009.

The premium of 180-centistoke fuel oil to the 380- centistoke grade was unchanged after climbing on Dec. 3 to $9.75 a ton, based on PVM data. This viscosity spread was the widest since Nov. 23, signaling bunker, or marine fuel, has risen less than higher-quality fuel oil.

Middle Distillates

January gasoil, or diesel, swaps increased 60 cents, or 0.6 percent, to $102.23 a barrel, the highest since Oct. 6, 2008, according to PVM. The premium to Dubai crude fell 42 cents to $14.13 a barrel, ending a three-day rally. This crack spread, a measure of refining profit, was at $14.55 on Dec. 3, the widest since January 2009.

Jet fuel’s premium to gasoil was unchanged after dropping to $1.20 a barrel, PVM said. This regrade was at the narrowest since Nov. 22, meaning it’s less profitable to produce aviation fuel compared with diesel.

Naphtha

Japan’s benchmark open-specification naphtha forward contracts for first-half January delivery were bid at $850.50 a ton against offers at $853.50, according to Ginga Petroleum Singapore Pte, a broker. That’s up from the Dec. 3 close of $835.50.

Gasoline’s premium to naphtha rose to $7.90 a barrel on Dec. 3, the strongest since Aug. 12, Bloomberg calculations showed. A widening reforming margin shows motor fuel is more profitable compared with naphtha.

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

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