"I suspect that this is the bottom," one fuel oil trader said. "If it goes any lower, there would have to be run cuts in Europe."

Others disagreed. The crack may widen further amid a continued glut in the region, and a dearth of demand in Asia as high prices deter buying from China, the region's largest purchaser of high sulphur fuel oil, they said.

The differing views come amid an 80-percent jump in the negative fuel oil crack versus North Sea Brent since the beginning of the year to $17.36 on August 13. The discount narrowed to $15.89 on Tuesday as benchmark crude futures extended Monday's declines.

The high sulphur fuel oil discount has widened as the price of the product lagged gains in crude futures. High sulphur fuel oil barge prices have risen only a tenth since July 1 to about $166 a tonne fob AR on Tuesday, compared with a 23 percent gain in crude futures during the same period.

The widening discount, which has grown more than four-fold since this time a year ago, has already prompted some refiners to cut throughput after margins turned negative.

ConocoPhillips last week cut runs at its 75,000 barrels per day Whitegate refinery in Ireland, while other refiners are considering doing the same.

Refinery margins at Rotterdam plants with simple topping units slipped to a loss of 42 cents a barrel last week, compared with a positive margin of 75 cents the week before, and $2.93 in July, according to Reuters calculations.

While reduced runs would cut fuel oil production, renewed exports of Russian fuel oil on board huge tankers from Europe to Asia are set to further reduce supplies by removing some of the European surplus.

U.S. refiner Koch last week fixed a 270,000-tonne VLCC for September 5 loading, while Malaysian state oil company Petronas is set to start loading a VLCC at the end of this month.

Petronas provisionally booked another for loading in the middle of September, traders and shipping sources said. Tintrade was also heard to have provisionally booked a 270,000-tonne VLCC for September 1 loading.

RUSSIAN EXPORTS TO DROP

Exports out of the former Soviet Union are also likely to drop in coming months, with falling temperatures in the weeks ahead set to boost domestic demand for home heating.

The closure of waterways to transport fuel oil from refineries to ports, usually from the middle of October, will also cut export volume capacity and make shipments transported via rail more expensive, further reducing supplies and supporting prices.

"You can feel it in October due to the huge inertia of the transport system," one trader said.

Still, limited opportunities to export fuel oil profitably to Asia amid a dearth of demand from China may slow any upturn.

Prolonging the regional glut, some sellers of FSU fuel oil said they plan to export similar volumes in September as they have been this month.

The paper spread between Singapore high sulphur fuel oil cargoes and ARA barges was pegged by brokers at about $26 on Tuesday. The arbitrage was at best marginal, with the spread at about $27.50, when Koch booked its VLCC last week.

As well as Koch's vessel, two 130,000-tonne tankers were also provisionally booked at the end of last week to work the route. The vessels were subsequently failed.

The ship booked by Koch last week was the first such spot arbitrage cargo in a month fixed to work the route from Europe to Asia. Koch also provisionally booked a second VLCC for September 11 loading, and subsequently failed that one.

Tintrade's VLCC would have no impact on supplies heading to the ARA region, with fuel oil in storage tanks in Denmark used to fill the vessel, traders said.

"Asian buyers are keeping their heads down," a trader said. "There is poor demand and plenty of offers from the U.S. Gulf coast and the Caribbean."