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RWE AG, Germany's second largest electricity producer and one of Europe's five largest utility firms, is due to launch a fuel oil trading desk in Singapore at the start of next year, Reuters reports.

The company, which already has a coal trading desk in Singapore, has become a regular fuel oil arbitrage player over the past few months since entering the Asian fuel oil market in August.

RWE fixed two Very Large Crude Carriers (VLCCs) to deliver 270,000 tonnes of fuel oil from Europe to Singapore in October.

The German utility is also reported to have two lots on board the Onoba. The VLCC loaded from Rotterdam on October 20th and is due to arrive in Singapore in December.

Another cargo is expected to be lifted from the UK on November 12th with delivery in Singapore on board the Al Jabriyah also scheduled for December.

Total Singapore inflows for December are now expected to surpass November's six-month low volumes of 3.1-3.2 million tonnes.

Energy trading business Essent N.V. was acquired by RWE AG in October 2009. As a result, Essent Trading International S.A. changed its name to RWE Supply & Trading Switzerland S.A. on April 26th 2010 and Essent Energy Trading B.V. changed its name to RWE Supply & Trading Netherlands B.V.

RWE began trading fuel oil over a year ago and hired former Sempra trader Martin Farr at the start of 2010. According to industry sources, the German utility will be employing two traders in Asia, one each for the physical and paper markets.

RWE's entry into an already congested Singapore fuel oil market looks set to squeeze poor trading margins further as market participants compete for a share in an ever-shrinking pie.

However, despite the poor trading environment, RWE could have the right ingredients to survive. Over the past few months RWE has already taken over some volumes from Russia that used to be brought into Asia by European commodity traders such as Glencore, BP and Vitol.

Image: RWE trading floor