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Major oil trading firms stow diesel, jet fuel on supertankers as demand rebound eyed

    * At least 7 VLCCs carrying clean products from Asia - ship
tracking data
    * EFS trades around minus $11 a tonne, typically unworkable
for
arb shipments

    By Koustav Samanta
    SINGAPORE, April 21 (Reuters) - Major oil trading companies
are stowing diesel and jet fuel on newly built supertankers in
Asia and Africa in anticipation of COVID-19 vaccinations driving
prices higher in the months ahead despite the activity being
less lucrative now than last year.
    Trafigura, Glencore and Vitol are holding about 1.5 million
tonnes of the industrial and aviation fuel on at least seven
Very Large Crude Carriers (VLCCs) off Singapore, Malaysia, Sri
Lanka and Africa, according to shipping sources and data from
analytics firms Vortexa, Kpler and Refinitiv.
    These storages are helping Asia hold back excess supplies
and prevent added pressure on prices as China ramps up diesel
exports from refining overcapacity while renewed lockdowns in
India to curb the spread of COVID-19 threatens to cool fuel
demand at the world's third largest oil consumer.
    "Given how narrow the current East-West arbitrage window is,
I would expect traders to opportunistically load gasoil on
newbuild VLCCs to head to the West, taking advantage of lower
freight costs on a per barrel basis," said Serena Huang, Asia
lead analyst at Vortexa.
    The exchange of futures for swaps (EFS), which determines
the gasoil price spread between Singapore and Northwest Europe
, has traded around minus $11 a tonne over the last
month – a level that typically makes it unworkable for arbitrage
shipments.
    Gasoil arbitrage to the west is usually profitable when the
EFS trades at about minus $15 a tonne or below, although it also
depends on factors such as freight rates and voyage length,
according to trade sources.
    "We have seen a number of vessels being fixed to arb to the
west (recently), but they have generally been VLCCs," said Kevin
Wright, Kpler's lead analyst for Asia Pacific.
    Unlike last year where traders profited from storing oil
because of a wide contango structure, the prompt monthly price
spread for the benchmark gasoil grade in Singapore
 has narrowed its contango structure by 55% in the
last six months, Refinitiv Eikon data showed.

    In a contango market, prompt prices are lower than those for
future delivery, which tends to encourage holders of physical
barrels to store them and sell later to secure higher prices.
But, a narrowing contango indicates the market may flip back
into backwardation – the opposite of contango that is usually
seen as a sign that there is demand for the product currently.
    Among the companies, Trafigura is the most active,
chartering five of the seven VLCCs to load diesel from China and
South Korea between March and April for UK, West Africa and Sri
Lanka, the data showed.
    
    
 VLCC Name  Charterer   Product Carrying     Location Details
                                             / Destination 
 Hunter     Trafigura   195,000 tonnes       Heading for Cape
                        diesel               of Good Hope
 Doris      Trafigura   251,000 tonnes       Heading to Lome,
                        diesel               West Africa
 Dickens    Trafigura   66,000 tonnes        Galle, Sri Lanka
                        gasoil               
 Erbil      Trafigura   274,000 tonnes       Lome, West Africa
                        diesel               
 Dhalkut    Glencore    281,000 tonnes       Lome, West Africa
                        ultra low sulphur    
                        diesel               
 Bahla      Vitol       170,000 tonnes jet   Malaysia
                        fuel                 
 Sur        Trafigura   98,000 tonnes        Singapore
                        gasoil + 129,000     
                        tonnes jet fuel      
 Sources: Vortexa, Kpler, Refinitiv
 

    
 (Reporting by Koustav Samanta; Editing by Florence Tan and
Muralikumar Anantharaman)
  
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