Asia Residual Fuels: Key Market Indicators for Nov 22-26

Tightening marine fuel 0.5% supply 

Amid tightening supply for marine fuel 0.5% in Singapore, the cash differential and the front-month timespread are set to continue on an upward trend during Nov. 22-26, according to traders based in the city-state, as few arbitrage inflows are expected in December.

The high sulfur fuel oil market remains amply supplied, according to a major bunker trader in Singapore, with declining delivered premiums reflecting the length in supply, amid stable demand.

Marine Fuel 0.5%

• Discussions for the Singapore Marine Fuel 0.5%S December-January spread Nov. 22 declined to $10/mt from the Nov. 19 assessment of $10.45/mt, with the spread bid at $8.75/mt against an offer at $10.25/mt, according to Intercontinental Exchange data.
• The December-January time spread and cash differential of the FOB Singapore marine fuel 0.5%S are expected to continue strengthening amid a lower inflow of arbitrage cargo in December, according to fuel oil traders in Singapore.
• Market sources expect about 1.5 million-2 million mt of arbitraged cargoes to arrive in Singapore in December, down from 2.5 million-3 million mt expected to arrive in November.
• An ongoing outage at the Portuguese Sines refinery has created a shortage of lower sulfur barrels in the West Mediterranean, market sources said. The Sines outage has reduced supply in the market by 200,000-250,000 mt/month with the refinery likely to remain closed until year end.
• At the same time, high natural gas prices are raising fuel oil demand from power utilities in Europe, traders added.
• Expectations of severe weather conditions over Japan and South Korea following the week ended Nov. 19 have subdued bunker demand as shipowners hold back inquiries, market sources said.
• Low sulfur fuel oil inventories at western and southern ports of South Korea could tighten further as utility sectors ramp up winter demand, tightening bunker supply and raising South Korea-delivered marine fuel 0.5% premiums.
• Ample low sulfur fuel oil inventories coupled with weak bunker demand has led suppliers to offer Zhoushan-delivered marine fuel 0.5% competitively to boost sales volumes, traders said.
• Hong Kong remains well-supplied with low sulfur fuel oil inventories, market sources said, as data by Kpler showed that a replenishment cargo of 494,933 barrels, or 77,942 mt, was received by ExxonMobil Nov. 19.

High sulfur fuel oil

• Discussions for the Singapore December high sulfur fuel oil viscosity spread rose to $9.75/mt Nov. 22, up from $8.30/mt assessed Nov. 19, according to Intercontinental Exchange data.
• The Singapore high sulfur fuel oil market is expected to weaken further due to an increase in supply in December, with the West-to-East arbitrage window remaining open, fuel oil traders said.
• “Given the relatively smaller size of the HSFO market compared to the VLSFO market, the arrival of an additional Suezmax carrying HSFO cargo could weaken the market,” said a fuel oil trader.
• In North Asia, Japan-delivered 380 CST HSFO bunker premiums are expected to stay firm for the rest of November amid falling stockpiles, largely due to the maintenance schedules of domestic refineries which are expected to only fully restart operations in December, traders said.