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Ships Moving Fuel Oil East Double as Arbitrage Gives Incentive

(Bloomberg) — The number of supertankers transporting fuel oil to Asian markets from the Caribbean between March and May has doubled since a year ago as traders seize on a profitable arbitrage, shipbrokers said.

Traders can take advantage of the price difference for fuel oil between the two markets, which is now greater than the cost to charter a vessel. Petroleos Mexicanos, China National Petroleum Corp., Glencore Holdings AG and Chemoil Energy Ltd. have chartered ships since the end of last month, according to shipping data compiled by Bloomberg.

At least five vessels are under charter to load oil between May 7 and June 5 for the voyage, Bloomberg data showed. Four ships were chartered in April, and one in March.

A supertanker shipment can return a profit of about $800,000 if traders buy high-sulfur fuel oil in the Gulf Coast spot market and sell July-settlement swaps in Singapore, according to data compiled today by Bloomberg.

Three months ago a trader would have lost money on the trade, as prices in the Gulf Coast were higher than in Singapore. One year ago, the arbitrage was open, but the price spread was volatile and a tanker cost nearly four times as much.


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