Asia Fuel Oil-Timespreads, cracks surge as tight supply looms

SINGAPORE, July 10 (Reuters) - Asia fuel oil prices and timespreads surged in active trade on Friday, with cracks jumping to five-month highs, as expectations of tightening supplies in the months ahead buoyed sentiment.

Traders said the strong fundamentals are supported by the growing belief that supplies will remain tight for the rest of the year, due to spillover effect from a firm Middle East market, reduced refinery run rates globally, and steady demand from the Asian marine fuels sector.

The price spread between the 180-cst and 380-cst bunker grade -- or the viscosity spread -- narrowed to a 2009 low of $0.10 a tonne on Friday.

The narrowing price spread is because the impact of tight supply is most keenly felt in the bunker market.

Marine fuels is the product's largest outlet, with Singapore ranking as the world's largest bunker port, chalking up average sales of about 3 million tonnes a month.

Bunker demand from Singapore and the region is expected to hold steady despite the economic downturn, with this year's monthly average volume at 2.99 million tonnes, up from last year's average of 2.91 million tonnes.

* CRACKS: Cracks rose to five-month highs of minus $2.40 a barrel from minus $3.60 a barrel on Thursday.

* SWAP SPREADS: The July/August 180-cst backwardation widened to $5.00 a tonne from $3.50 a tonne, while the 380-cst backwardation rose to $6.25 a tonne from $4.50 a tonne. <ASIA/SWAP/FUEL>

* CASH DEALS: Vitol sold 20,000 tonnes of 380-cst fuel oil for Aug 5-9 lifting to Kuo Oil at a premium of $6.00 a tonne to Singapore spot quotes. Petrobras sold 27,000 tonnes of 180-cst fuel oil for Aug 4-8 lifting to Kuo Oil at a premium of $3.00 a tonne to Singapore spot quotes. SPOT LSWR LSWR-SIN 63.00/63.50 63.25 0.00 SPOT FO 180 CST FO180-SIN 380.75/381.25 378.15 +2.85 SPOT FO 380 CST FO380-SIN 380.70/381.10 377.35 +3.55 JUL FO SWAPS FO-1M-S 378.75/379.25 376.25 +2.75 AUG FO SWAPS FO-2M-S 373.75/374.25 372.75 +1.25 SINGAPORE BUNKER BK380-B-SIN 398.00/400.00 398.00 +1.00 (Reporting by Jennifer Tan; Editing by Keiron Henderson)