European
fuel oil prices are expected to strengthen next year from current lows on
strong demand from Japan and China for power generation and tighter supplies
due to a new tax regime in Russia, according to analysts and traders.
Prices in Europe could rise in the coming months to more than the $660 per
metric ton level seen in July when power producers were restocking ahead of
peak autumn industrial demand, analysts and traders said.
"We're talking beyond $660, that's for sure," said Charles Harcourt-Groome,
head of oil trader Global Vision Bunkers.
Demand for fuel oil in China will likely increase, as well as demand in Japan,
as the country continues to use alternatives to nuclear power for power
generation since the earthquake and tsunami in March, he said.
In addition to an expected increase in demand from Japan, Russia's push to
upgrade refineries means that there will be less fuel oil supply available in
Europe, said Amrita Sen, Barclays Capital oil analyst.
Fuel oil, a heavy oil product used for power generation and transport, is
currently trading at a seven month low of $591 per metric ton on economic
weakness in Europe.