Very low sulphur fuel oil (VLSFO) production climbed to six-month highs this week as demand for the shipping fuel at most ports are back at pre-pandemic levels, says an article published in MarineLink.
Pre-pandemic levels demand
According to traders and analysts, Asian refiners’ have profited from producing very low sulphur fuel oil (VLSFO). The production climbed to six-month highs this week as output cuts keep supplies tight while demand for the shipping fuel at most ports are back at pre-pandemic levels.
This trend is likely to continue for the rest of the year, encouraging Asian refiners to prioritize VLSFO production along with petrochemical feedstock naphtha, where demand has also firmed.
The front-month VLSFO crack was at $9.43 per barrel above Dubai crude on Tuesday, its highest since April 10. The residual fuel also posted the highest average margin among refined products so far this year, according to data on Refinitiv Eikon.
“0.5% (VLSFO) has no doubt been the strongest part of the barrel this year,” said Matt Stanley, Dubai-based oil broker at Starfuels.
Pandemic mobility restrictions
Residue fuel demand in shipping and power generation has been relatively resilient. But refined fuels such as gasoline and jet fuel were battered by mobility restrictions imposed during the pandemic.
Picking up bunker fuel demand
Director for Asia oil at FGE
Sri Paravaikkarasu, director for Asia oil at FGE said, “Global ports are seeing a strong pick-up in bunker (fuel) demand.” According to her:
- Lower VLSFO arbitrage volumes from Brazil would tighten supplies in the Singapore hub, offering further price support.
- Both the high-sulphur fuel oil (HSFO) and VLSFO markets will continue to remain tight over November and December.
Singapore-based fuel oil trader
Singapore-based fuel oil trader said, bunker demand in Asia has rebounded to above pre-COVID levels everywhere except in Fujairah.
The world’s largest bunkering hub Singapore posted a 6% rise in total marine fuel sales in the first nine months this year.
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Source: MarineLink
