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Asia product swaps: Gas oil up, backwardation steep

SINGAPORE: Singapore gas oil swaps rose in quiet early trading on Monday as a prompt physical squeeze kept the front months' backwardations at lofty levels.

Traders said the gas oil strength was two-fold on the back of large Indian purchases and news that BP Amoco had declared force majeure on two prompt cargoes in Singapore due to problems at its affiliate Singapore Refining Co (SRC).

February was last quoted at $30.10/$30.30, up from Friday's $29.80/$29.90. March was last quoted at $28.35/$28.55.

Brokers said the February/March spread was last quoted at $1.70/$1.80. The spread had traded up from $1.20 to a high of $1.85 on Friday following news of the Indian tender results and the BP Amoco force majeure.

"The full impact of the force majeure is not really known right now. How this market moves from now will also depend on that," one trader said.

Officials from BP Amoco and SRC declined to comment immediately on the force majeure or the scope of the problem at the refinery. SRC operates a 285,000 barrel-per-day refinery which is 30-percent owned by BP Amoco with Caltex and Singapore Petroleum Co taking up the remaining shares.

India surprised the market on Friday when it bought seven gas oil cargoes totalling up to 255,000 tonnes for delivery in the first half of March and issued a second tender for delivery over the entire month of March.

Traders said the Indian purchases tightened the Singapore market considerably as several of the cargoes bought for delivery to the east coast would be sourced from the region.

The sharp gas oil price hike did not lead to a squeeze in the regrade, or gas oil over jet fuel spread, as demand for jet-kerosene had also picked up on the back of colder weather in the northern hemisphere.

February regrade was last quoted steady from Friday at $3.40/$3.60 per barrel.

Traders said gas oil's gains were all the more impressive when compared with crude, which had in fact lost value after the Asian trading hours.

On Friday, March US light crude futures closed 23 cents per barrel higher at $28.20 but lost ground on ACCESS to trade down five cents at $28.15.

During Asian hours on Friday, March US light crude futures had gained 53 cents to $28.50.

Fuel oil swaps were steady with February paper last quoted at $141.00/$142.00.-Reuters