Asia Residual Fuels: Key Market Indicators for April 4-8

HSFO market

The high sulfur fuel oil market is also expected to remain firm in the week after the market spiked in March due to a decline in cargo flows.

Crude oil futures

Crude oil futures opened higher in Asia April 4, with May ICE Brent trading at $103.91/b at 0300 GMT, up 27 cents/b from the 0830 GMT Asian close April 1.

Marine fuel 0.5%S

• The cash differential to the Mean of Platts Singapore Marine Fuel 0.5%S swaps assessment weakened to $18.83/mt April 1, the lowest since March 14, S&P Global Commodity Insights data showed, as Indonesia increased exports of fuel oil exports, which can be used as cutter stocks, for April loading. However, supply is expected to remain tight amid a strong gasoil crack spread.
• Singapore Marine Fuel 0.5%S May-June swap spread was pegged at $25.25/mt at 0300 GMT April 4, weakening from $26.75/mt at the Asia close April 1, according to brokers.
• Demand from end-users in the bunker fuel market, which has been weak, was unlikely to see any significant uptick in the week on account of high flat prices.
• The premium for Singapore-delivered marine fuel 0.5%S bunker — which has not quite kept pace with a firming upstream marine fuel 0.5% cargo, where valuations have soared in the recent sessions on the back of less-than-ample availabilities of finished grade product — was expected to inch higher from prevailing levels.
• Reflecting the languid state of the delivered low sulfur marine fuel market, the spread between marine fuel 0.5%S bunker sold in Singapore on a delivered basis and on an ex-wharf basis has progressively shrunk to average $2.30/mt in March from $4.22/mt in February and $8.69/mt in January, S&P Global data showed.
• Valuations of IMO-compliant marine fuel delivered in the bunkering hub of Fujairah was also expected to be lofty on tight availability of finished grade product, especially for prompt delivery. The premium for Fujairah-delivered marine fuel 0.5%S bunker over benchmark Singapore marine fuel 0.5% cargo surged to average $43.85/mt in March from $25.97/mt in February, S&P Global data showed.
• The diversion of LSFO bunker inquiries to Zhoushan is expected to continue amid limited stockpiles and thinning competition in South Korea’s downstream market, trading sources said.
• Lackluster LSFO bunker demand in South Korea is expected in early April amid limited inventories as refineries undergo scheduled maintenance through mid-April, local traders said.
• Downstream bunker traders have declined both spot and term contractual nominations, as the suspension of ex-wharf loadings at ENEOS and Idemitsu refineries since mid-March has steadily reduced availability, Tokyo-based suppliers said.

High sulfur fuel oil

• The Singapore HSFO market is likely to see a lower cargo inflow this week as US refiners increasingly take HSFO from the Middle East as they are no longer buying Russian fuel oil.
• A relatively lower volume of product arriving from the West on account of a drop in Russian product finding its way into the fuel oil pool, coupled with pockets of concern over fuel quality in Singapore, has helped lift valuations.
• Sentiment in the Singapore high sulfur bunker fuel market is expected to be bolstered this week by tight availability of finished grade product.
• Tight prompt availability has meant that the earliest that most suppliers are able to offer product to the spot market is at least 10 days forward.
• The premium for Singapore-delivered 380 CST bunker over the Mean of Platts Singapore 380 CST HSFO assessment rose to a near 2-year high of $28.66/mt April 1. The differential was last higher at $30.54/mt on April 30, 2020, S&P Global data showed.
• HSFO inventory tightness is gradually easing as demand from Japan’s utility sector seasonally tapers off in spring, so traders expect rising availability for bunker sales.
• Lackluster volumes of South Korea-delivered 380 CST HSFO bunker fixtures are likely to keep domestic inventories elevated, with most refiners still actively offering the grade for prompt delivery, traders said.