Asia’s low sulfur fuel oil cash differential slumped to its lowest level in more than two years July 19, weighed down by higher arbitrage volumes coming into the region, aggressive offers and muted buying interests for early August-loading cargoes on the physical trade window this week.
Into Negative Territory
The cash differential, which flipped into a negative territory for the first time in more than two months in the week ended July 13 on the back of competitive offers from Glencore, has come under renewed pressure in the week to July 20 primarily due to persistently weaker offers from Trafigura in the absence of bids during the Platts Market on Close assessment process for the last three consecutive sessions. “The [Asian] LSFO market is currently very bad … Too many suppliers are competing for getting out their barrels,” a Singapore-based trader said, adding that at least around five vessels have been fixed from Northwestern Europe to bring in supplies to Singapore when the West-East arbitrage window opened a couple of weeks earlier.
Inclusive of bio-blended low sulfur fuel oil, total sales of the International Maritime Organization-compliant bunker grade slipped to the lowest since February at 2.393 million mt in June, according to the latest data from the Maritime and Port Authority of Singapore released on July 14. Although some traders said the differentials have gone down too low too soon, it wasn’t that weak for the overall market situation, which should see some possible upsides in the coming weeks, as the phase for the bulk of arbitrage inflows has been over. They added that the first half of August should see marginally lesser arrivals than H2 July. “I personally don’t think it is that bad … Some of the cargo players are expecting ‘tank tops’ and they would need to sell cheap to make space for incoming barrels,” another trader said.
End User Demand
Additionally, lackluster end-user demand has depressed Singapore’s LSFO delivered and ex-wharf bunker premiums, traders said. With the inflows of replenishment cargoes, supply is also expected to remain ample for the requirements of the downstream market in the near term, they added. Two replenishment shipments totaling 1.72 million barrels, or 270,805 mt, of LSFO hailing from Kuwait’s Al-Zour Refinery were scheduled to discharge in Singapore on July 21 and July 30. This follows a previous import of 849,999 barrels, or 133,858 mt, from the same origin to Singapore on July 5, according to the latest data by Kpler.
Most recently, the ex-wharf marine fuel 0.5%S cargoes for balance-July term contractual supply were seen offered around premiums of $5-$8/mt to the benchmark FOB Singapore marine fuel 0.5%S cargo values. The premiums were almost halved to one-third of the $13.50-$15/mt level concluded earlier during late June to early July, according to local traders. “Suppliers seem to be in a hurry to make more ullage and clear [stocks] right now … So, whether [LSFO bunker] stems are prompts or not, there’s not much of [a difference] in premiums,” a Singapore-based bunker supplier said.
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