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India's Essar Oil could be about to set up a fuel oil trading desk in Singapore in order to help market the sale of products from its Vadinar refinery, industry sources report.

According to news agency Reuters, mid-level manager Vivek Singh has been relocated to Singapore to assess the possibility of setting up a trading desk. The company is understood to be particularly interested in exploring the idea of selling fuel oil and gasoline in the city-state.

If the project goes ahead, Essar would join slew of companies venturing into the residual fuels market with the expectation that refinery upgrade projects in Asia and Europe could potentially lead to high trading margins due to tightening supplies of residual fuel.

Last month, Geneva-based trading firm Mercuria Energy was said to be considering selling marine fuel in Singapore following reports that it has leased a supertanker in southern Malaysian waters. In June the company borrowed $685 million via an oversubscribed one-year revolving credit facility to help finance its rapid expansion in the energy markets.

Also in July, commodity trading firm Noble Group was said to be still looking to lease a supertanker for at least two years to use as fuel oil storage. The comapny began its fuel oil business in April after reportedly hiring former Trafigura traders who left the global trading house over the past 12 months.

Other companies to have also recently entered the fuel oil market include Asian trading firm Strong Petroleum, Japan's Itochu Petroleum and China-based Southern Petrochemical Co Ltd..

Last month, Southern Petrochemical Co. was said to have acquired a supertanker to use as floating storage to trade high sulphur fuel oil (HSFO) in Singapore.

The Nan Fang 3, a very large crude carrier (VLCC), arrived in Singapore in June and is positioned at Hin Leong's anchorage. The tanker is able to blend fuel oil to meet marine fuel specifications.

Strong has also leased a VLCC, whilst Itochu recently sealed a deal to lease 150,000 cubic metres of storage at Chemoil's Helios Terminal on Jurong Island, Singapore.

Meanwhile, Guangzhou-based Southernpec paid around $15 million for a 284,000-tonne supertanker to store fuel oil. The tanker is already anchored off southern Malaysia's Tanjung Pelepas port and the company is due to start supplying bunker fuel in Singapore in the near future, according to market sources