ASIA RESIDUAL FUELS: Key Market Indicators For July 12-15

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Singapore marine fuel oil 0.5%S supply was expected to ease slightly in the week of July 12-15 as refiners started selling spot cargoes on a high crack spread.

High sulfur fuel oil supply was likely to remain ample July 12-15 due to increasing inflows to Asia, sources said, even though Saudi Arabia has started buying HSFO for demand in the Red Sea.

Crude oil futures kicked off the week lower in mid-morning trade in Asia July 12, with September ICE Brent at $105.78/b at 11 am Singapore time (0300 GMT), down from $106.11/b at the 0430 GMT Asian market close July 8.

Marine fuel 0.5%S

Prices of delivered marine fuel 0.5%S bunker are likely to be weighed down July 12-15 by weaker crude oil prices, which were in turn pressured by a rise in COVID-19 cases in China as well as the stronger US dollar, though downside could be capped by steady bunker fuel demand.

Light sulfur fuel oil demand at the North Asian bunker hub of Zhoushan is likely to pick up as inventories gradually ease; traders expected higher volumes of domestically-produced cargoes to supplement supplies in the delivered market.

The adverse weather condition in Zhoushan is expected to ease during the trading week started July 12 as refueling operations were delayed during the week prior despite robust spot demand for LSFO bunkers, market sources said.

The Singapore August swaps marine fuel 0.5%S crack spread against Dubai crude dropped to $27.24/b on July 8, the lowest since May 24, S&P Global Commodity Insights data showed. The spread plunged from an all-time high of $42.52/b on June 30.

Market sources said there was incremental supply coming from Asian refiners, which raised low sulfur fuel oil production due to high crack spreads.

Amid average demand for LSFO bunkers in South Korea, the healthy product availability for prompt delivery is expected to cap bunker premiums as most refiners were heard actively offering in the downstream market, local bunker suppliers said.

High sulfur fuel oil

Singapore high sulfur bunker fuel was expected to see a supply overhang July 12-15 due to increasing cargo inflow into Asia, sources said.

Saudi Arabia has started buying HSFO for demand in the Red Sea. Aramco Trading Company chartered at least four Aframax tankers — Amax Anthem, Minerva Roxanne, Ambrosia and Dugi Otok — to move 80,000 mt fuel oil cargoes on the route for loading over July 17-20, shipping sources said.

Prices of delivered HSFO to continue to retreat July 12-15 on slow demand amid ample availability. 380 CST HSFO bunker averaged $507.80/mt in the week ended July 8, down from $584.80/mt the previous week.

As the supply of HSFO in Japan is sufficient to meet uptick in downstream demand, traders expect bunker premiums to remain capped this week.

HSFO stockpiles and barge availabilities to remain healthy in South Korea this week, traders said; steady arrival of container liners amid easing port congestions along the US West Coast would likely support HSFO bunker demand.

Plentiful HSFO inventory is expected to weigh on delivered bunker premiums in Hong Kong this week, as barge availability remains ample amid moderate demand, market sources said.

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Source: Spglobal

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