The Singapore low sulfur fuel oil supply is expected to remain tight in the April 11-15 trading week as higher gasoil crack spread continuously draws LSFO blending components to the middle distillate market.
The high sulfur fuel oil market is also likely to stay strong in the week due to a decline in an inflow of the Middle Eastern cargoes into Asia after the Russia-Ukraine conflict.
Crude oil futures opened lower in Asia April 11, with June ICE Brent trading at $100.47/b at 0300 GMT, down $1.11/b from the 0830 GMT Asian close April 8.
Marine Fuel 0.5%S
Singapore Marine Fuel 0.5%S May-June swap spread weakened in April from March. The front-end time spread averaged $21.29/mt over April 1-8, down from $30.42/mt in March, S&P Global Commodity Insights data showed.Market sources said supply would stay tight despite weaker time spread as sulfur and viscosity cutter stocks, such as vacuum gasoil and light cycle oil are taken by the gasoil market as the gasoil crack spread has been strong, fuel oil traders said. The time spread has weakened following Brent swaps while the front-end May-June spread averaged $1.27/b over April 1-8, down from $3.33/b in March.
Market optimism in the downstream bunker market stemmed from a less-than-ample availability of finished grade product, especially for delivery on a prompt basis; only a few suppliers were still in a position to offer product to the spot market for delivery less than around 10 days, traders said.
The delivered market was pricing higher on account of a rising replacement cost for bunker sellers due to a firming upstream market, traders said. The premium for Singapore-delivered marine fuel 0.5%S bunker over the benchmark upstream Singapore marine fuel 0.5% cargo assessment averaged $29.92/mt in the week ended April 8, up from the previous week’s average of $23.65/mt, S&P Global data showed.
Market volatility is still likely to cap demand for Singapore-delivered marine fuel 0.5%S, whereas stockpiles in the downstream market was heard balanced against demand, according to local bunker suppliers.
In Fujairah, a tight prompt availability situation coupled with limited slots available for scheduling barge delivery of IMO-compliant product on a prompt basis to the spot market was likely to help set a floor for Fujairah-delivered marine fuel 0.5%S bunker premium.
Uptick in LSFO bunker demand is likely to drawdown inventories at the port of Hong Kong for the rest of April, following the easing of quarantine measures for bunker-only calls since April 1, bunker suppliers said.
Traders anticipate LSFO bunker inventory shortfalls in Japan to prolong despite the resumption of loadings for smaller parcels expected during the week started April 11 at Idemitsu and ENEOS refineries.
Steady downstream demand for Zhoushan-delivered marine fuel 0.5%S amid limited availability of the ex-wharf grade is expected to buoy premiums, according to market sources.
High Sulfur Fuel Oil
Both 180 CST and 380 CST grades are expected to remain tight as US refiners increasingly take HSFO from the Middle East as they are no longer buying Russian fuel oil.
The 180 CST grade is tight in particular as demand from South Asia has been surging. As a result, the Singapore 180 CST cash differential to MOPS strip rose to $31.66/mt on April 8, the highest since Nov. 5, 2019, when it stood at $34.66/mt, S&P Global data showed. The 180 CST-380 CST spread hit an all-time high for three days in a row to rise to $56.75/mt on April 8, S&P Global data showed.
The prevailing concerns around contaminated fuel at the city-state were also limiting the number of suppliers to source the product from, bunker traders said. Tight prompt availability has meant that the earliest that most suppliers are able to offer product to the spot market is around 10 days forward.
This in turn was likely to have a cascading effect on Singapore-delivered 380 CST high sulfur bunker premium, which has indeed sky-rocketed in the recent days. The premium for Singapore-delivered 380 CST high sulfur bunker over Singapore 380 CST HSFO cargo, which averaged $33.88/mt in the week ended April 8, was up from the previous week’s average of $23.83/mt, and stood at a near two-year high $36.67/mt on April 8, S&P Global data showed.
Amid above-average volumes of fixtures since April, bunker suppliers expect rising upstream availability of HSFO cargoes in Hong Kong to supply the strengthening downstream demand.
The recent diversion of inquiries for delivered HSFO to South Korea is expected to lift bunker demand while stockpiles remain ample, as buyers were heard skipping bunker-only calls in Singapore amid quality concerns.
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Source: Platts
