20000418

Asia Products Outlook-Rising supplies dampen

SINGAPORE: Rising supplies are beginning to exert downward pressure on Asian oil product prices in the face of a slowdown in end user demand, traders said on Monday.

They said gas oil appeared to be the weakest product with fuel oil benefitting from a tight prompt market due to reduced exports from the Middle East.

"There's gas oil coming out from quite a few places and outside of Hin Leong buying, I've not seen any big orders from end users in the region," a trader said.

Local trader Hin Leong had been the main spot buyer in Singapore and had over the month bought just over two million barrels. But despite the trader's large purchases, the number of spot sellers had not waned.

Traders said the emergence of extra spot barrels from non-traditional sources such as Taiwan and Thailand were exerting further downward pressure on the market.

"The Koreans have dropped their offers to 30 cents and yet nobody's rushing in to buy," a trader said.

They said the last Korean cargoes were sold at about a 50-cent premium to Singapore prices on an fob basis.

Singapore middle distillate stocks rose 959,000 barrels to 6.313 million barrels for the week ended April 12, the Trade Development Board (TDB) said on Thursday.

Traders said spot prices, which had lost more than $2 per barrel over the week, were expected to lose more ground this week if no support came from crude.

Fuel oil which had fared much better than gas oil last week, losing the equivalent of 40 cents per barrel over the last five trading days, was also likely to come under selling pressure, traders said.

They said the market, which had performed relatively well, due to tight prompt supplies was beginning to lose its steam due to improved supplies in May.

"For April, we are very tight, there are people still looking to cover earlier shorts but can't find any barrels. I've heard bids of up to $10 premium being turned down for April cargoes," a trader said.

The market was trading at about $5 premium for May barrels.

The strong prompt month had kept the front-month crack spread firmly in positive territory.

May fuel oil/Dubai was last seen at about plus 40 cents with June at minus 30 cents.

Traders said the market would stage a surprise rally if China emerged to buy in a big way for May.

"The majors in Hong Kong are looking for barrels but the Chinese have yet to come out to buy in a big way like they did for March," a trader said.-Reuters