- Market demand continues to sustain buying interest for Asian high sulfur fuel oil.
- Singapore Marine Fuel 0.5%S market has seen a revival of buying interest.
- Singapore Marine Fuel 0.5%S August/September contango narrowed to minus $1.50/mt.
- Singapore Marine Fuel 0.5% cargo assessment was assessed at $18.50/mt.
- Zhoushan delivered marine fuel 0.5%S differential to the benchmark FOB Singapore Gasoil.
- Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments.
- Market participants are anticipating a near-term relaxation of China’s thermal coal import policy.
- Coal imports may be in the cards to meet the strong power demand expected in July and August.
According to an article published in Platts, market demand continues to sustain buying interest for Asian high sulfur fuel oil in the weeks ahead, while a pickup in buying interest for Singapore low sulfur fuel oil in July has largely been offset by high stocks in both Singapore and Fujairah.
Marine fuel 0.5% sulfur
- The Singapore Marine Fuel 0.5%S market has seen a revival of buying interest so far in July, even as traders expect August-delivery arbitrage volumes to fall compared to July, due to the narrow Asia-Europe price spread, fuel oil traders said.
- Trading sources shrugged off the 2.1% weekly decline in Singapore’s onshore residue stocks to 26.11 million barrels in the week ended July 15, noting that on-shore stocks remain high relative to demand. Traders also pointed to approximately 5 million mt of fuel oil currently held in floating storage in Singapore waters.
- The Singapore Marine Fuel 0.5%S August/September contango narrowed to minus $1.50/mt on July 17, the highest since February 21, according to S&P Global Platts data.
Bunker side remain bearish
- On the bunker side, suppliers remain bearish on demand in the week ending July 25, pointing to buyers procuring on a need-only basis amid the current ample supply.
- Reflecting the subdued sentiment in July, the July 17 Singapore-delivered Marine Fuel 0.5%S bunker premium to Singapore Marine Fuel 0.5% cargo assessment was assessed at $18.50/mt, half the 18-week high premium of $36.08/mt on April 30, Platts data showed.
- In the Northeast Asian bunker market, stiff competition among low sulfur bunker suppliers at Zhoushan is expected to keep a lid on bunker fuel premiums, according to traders in the region.
- The Zhoushan delivered marine fuel 0.5%S differential to the benchmark FOB Singapore Gasoil 10ppm cargo assessments averaged minus $38.88/mt over the week ended July 18, down from the average in the week ended July 9 of minus $35.28/mt, Platts data showed.
- Furthermore, in anticipation of more price volatility over the third quarter, traders said Chinese suppliers have mostly chosen not to ink term contracts for this period.
High sulfur fuel oil
- More high sulfur fuel oil cargoes is expected to be exported from Taiwan in August after a fire on July 15 caused Formosa Petrochemical Corp. to shut its residue desulfurization unit at Mailiao, according to traders, who added there is expected to be no impact to the domestic bunkering sector.
- Meanwhile, in the Singapore downstream bunker market, tight supply is expected to support the market, with at least one major supplier not offering any HSFO bunkers in the near term, according to traders.
- Reflecting this strength, the Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments increased to $23.91/mt on July 17 compared with $14.01/mt on July 9.
Asian refiners eye cheaper European crudes
- But to kick things off, crude oil traders in the region will be closely monitoring South Korean and Chinese refiners’ spot cargo purchases from the North Sea and Arctic Russia.
- Narrow Brent-Dubai spreads make low sulfur European grades more attractive versus Persian Gulf crudes.
- South Korean majors are especially interested in North Sea Forties and Russian arctic condensates, while ChemChina recently received Arctic Russian Novy Port crude, for the first time.
- Now, more refineries are expected to ramp up their output after seasonal maintenance, and product demand is also expected to increase as coronavirus related lockdowns ease.
Clean freight market eyes recovery from a 20-year low
- This could mean a modest recovery for key clean tanker freight rates, which have been reeling at their lowest in about 20 years.
- Market participants said freight rates are close to bottoming out, and they are expecting a slight improvement from the current lows.
- Meanwhile, in the dry bulk markets, Capesize freight rates have likely bottomed out last week.
- Owners pulled back on their offers and expect better demand this week, with more participation expected from all major iron miners in the spot market.
Iron ore majors’ output, export data in focus
- Speaking of iron ore, Vale and BHP’s production and export numbers for April and June are expected to be released this week.
- Vale’s output will be especially scrutinized as its operations were temporarily sidelined due to rising coronavirus cases in Brazil.
- Data from cFlow, Platts’ trade flow software, indicates that Vale has increased its shipments for Q3, but are likely to fall short of its targets this year.
China’s coal import policy in focus
- Now, adding potential support to dry bulk rates, market participants are anticipating a near-term relaxation of China’s thermal coal import policy.
- With domestic China coal supply a bit short and hydroelectric generation expected to be weak, further coal imports may be in the cards to meet strong power demand expected in July and August.
Outages may boost SE Asia methanol price
- Moving on to petrochemicals, Southeast Asia’s methanol prices are expected to be bullish this week, due to two major unexpected production outages.
- Malaysia’s Petronas and Brunei Methanol Company, which have a combined total output of over 2 million mt/year, are expected to resume production only in early August.
- With hardly any spot cargo from the Middle East, and reverse trade flow shipments from China an expensive proposition — participants expect prices to rise this week.
LNG markets watch for US cargo cancellations
- And in LNG, the market could be looking at the possibility of yet another round cancellations for US LNG, October loading.
- Over the last few months, as many as 40 cargoes from the US have been canceled per month.
- But with the upcoming winter and an increased interest in floating storage plays, demand for US LNG may be rebounding – reducing the expected cancellation volume that will be known this week.
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