- Singapore onshore stocks of petroleum products fell to an eight-month low in the week.
- The prices came in at 38.372 million barrels, down from 41.725 million barrels in the previous week.
- Switching process involves clearing storage tanks occupied by high-sulphur fuel oils (HSFO) and their blending components.
- The decline in inventories sank to a nine-month low of 10,163 million barrels, an residual fuels that slipped to a six-month low of 18.539 million barrels.
According to an article published in Reuters, oil product inventories in the Singapore storage and trading hub fell to an eight-month low in the week ended July 17.
Gearing up for change
As per official data showed, suppliers are gearing up for rule changes to make marine fuel cleaner.
Singapore onshore stocks of petroleum products, which include gasoline, diesel, jet fuel and residual fuel oil, came in at 38.372 million barrels, down from 41.725 million barrels in the previous week and their lowest since the week ended Nov. 14 last year, data from Enterprise Singapore showed on Thursday.
Opting for low-sulphur fuel
“Several industry players are switching their tanks towards the different kinds of low-sulphur fuels rather than just high-sulphur fuel oil,” a source with a Singapore-based storage operator said when asked about shrinking oil product stocks.
The switching process will take time and involves clearing storage tanks occupied by high-sulphur fuel oils (HSFO) and their blending components, said the source, who declined to be identified because of company policy.
Decline in inventories
Under International Maritime Organization (IMO) rules that come into effect from 2020, ships will have to use fuel with a sulphur content of 0.5% or less, down from 3.5%, in one of the biggest fuel-spec changes to hit the global shipping and oil refining industries in decades.
The decline in inventories was led by distillates, sinking to a more than nine-month low of 10,163 million barrels, an residual fuels that slipped to a six-month low of 18.539 million barrels, the data showed.
Eight month low
Fuel oil inventories have registered five straight weeks of declines and are 6% below their year-ago levels, the data showed, raising concerns that tightening supplies could struggle to meet current demand.,
Declining HSFO inventories, together with the expected sharp decline in demand for HSFO after the IMO rules kick in, have helped to push the fuel oil market structure into steep backwardation in recent weeks, making HSFO storage increasingly unprofitable.
Backwardation results in inefficient cost storage
A backwardated market typically has tight inventories, with the price for immediate delivery trading above future prices. Storing of oil products is uneconomic in a backwardated market because it is difficult for traders to recover storage costs.
Singapore’s onshore light distillates, which comprise mostly gasoline, had the most significant drawdown, resulting in inventories hitting close to a 9-1/2 month low, the data showed. There was no record of Indian gasoline exports to Singapore, while Taiwan’s volumes of 22,257 tonnes were 80% down from the week ended July 10.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Reuters
