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Fri 17 Dec 2010, 13:50 GMT

RWE steps up fuel oil selling strategy


German utility is reported to have sold large volumes of fuel oil swaps this week.

RWE AGM, Germany's second largest electricity producer and one of Europe's five largest utility firms, is reported to have sold large volumes of fuel oil on Thursday.

The utility sold 200,000 tonnes of fuel oil of the Januray/February timespread at backwardation of 25 cents and another 30,000 tonnes of January at $513.50-$514.25 a tonne, market sources said.

RWE has intensified its activities in the fuel oil market in recent months fixing 1-2 cargoes on board Very Large Crude Carriers (VLCCs) from Europe to Asia each month since September.

The company fixed two VLCCs to deliver 270,000 tonnes of fuel oil from Europe to Singapore in October. RWE was also reported to have transported two lots on board the VLCC Onoba, which loaded from Rotterdam on October 20th and was due to arrive in Singapore in December.

Another cargo was reported to have been lifted from the UK on November 12th with delivery in Singapore on board the Al Jabriyah, also in December.

More recently, RWE fixed arbitrage cargoes on board the VLCC Al Salheia and the Capricorn Star, which are scheduled to arrive in Singapore on January 13th and at the end of January respectively.

This month RWE has been more active in selling swaps and, up until Thursday, sold 100,000 tonnes of the Januray/February timespread, another 230,000 tonnes of December and 155,000 tonnes of January.

Thursday's trading play is the largest volume traded by RWE in a single day and the company's first major strategic move in the Asian fuel oil market since it began transporting physical volumes to Asia earlier this year.

RWE's bear play sets it against competitor Brightoil's bull trading strategy, which has seen the Chinese firm purchase over a million tonnes of swaps and half a million tonnes of physical cargoes since the start of the month.

Last month it was reported that RWE plans to launch a fuel oil trading desk in Singapore at the start of next year. 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.

Image: RWE trading floor

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