After briefly flipping into a contango Oct. 28 for the first time in a month, the Singapore Marine Fuel 0.5% front-month November/December swap returned to a backwardation of 25 cents/mt in the Oct. 29 assessment, "due to the interplay between reduced supply, and lacklustre demand", according to a Singapore-based fuel oil trader.

The Oct. 28 assessment of minus $0.35/mt was the first time the market was assessed in a contango since Sept. 24, when it was assessed at minus $0.25/mt.

"The [front-month swaps] market is actually keeping very close to a flat structure; there aren't increases in [low sulfur fuel oil] production rates, but on the other hand, even though the estimates of Singapore's November arrival arbitrage volumes are inching above October's levels of 1.5-2 million mt, we're not seeing a commensurate rise in demand," said the trader.

Most Asian refiners continue to maintain lower LSFO production rates, continuing a production plan which began towards the end of the second quarter amid oversupply and high floating storage inventory in Singapore, in spite of the Asian LSFO crack spread having strengthened in October.

The average spread from the front month Dubai swap in October thus far stands at $8.73/b, an increase from September's average of $6.97/b, Platts data showed, although refiners pointed to the case for an increase in production as being more complicated.

"You have to take into account the fact that increased LSFO production also means increased yields of middle distillates, which aren't doing too well at the moment," said a source close to Thai refiner PTT, adding "it's only those [refiners] who can find demand for both kinds of products who will take such a decision [to increase LSFO production]."

On the demand side, estimates from some of Singapore's bunker suppliers showed that low sulfur bunker sales in October on the whole were slightly lower compared to September.

"I know some suppliers have said they have had a steady number of inquiries, but for us, we've seen a few quieter periods this month; I'd be very surprised if October's [sales] figures are higher than September," said one of Singapore's largest bunker suppliers Oct. 29.

Data from Singapore's Maritime and Port Authority showed that the city-state recorded 2.9 million mt of LSFO bunker sales in September.