Bunker fuel supply tightens in North Asia on weak gasoil margins
27th October 2020 08:53 GMT

The supply of bunker fuel has tightened across North Asian ports including South Korea, Japan and China as refiners have cut run rates on weak gasoil refining margins, which has led to a drop in fuel oil volumes as well, market sources told S&P Global Platts.

The Asian gasoil market has been in the doldrums on continued low demand due to ongoing social distancing measures, with poor fundamentals coming in even as regional supply remains at healthy levels.

The downward pressure on the Asian gasoil market has been reflected in historical lows for the FOB Singapore 10 ppm sulfur gasoil physical crack to front-month cash Dubai, which has been rangebound at just above the $2/b-mark over recent trading sessions. At the Asian close Oct. 26, the gasoil physical crack to front-month cash Dubai was assessed at $2.21/b, up 8 cents/b on the day. The crack had reached a record low of $1.63/b on Sept. 24, 2020.

Market sources said that due to dismal margins, especially for middle distillate products, regional refiners implemented refinery run cuts which has resulted in curtailed production across the slate of refined oil products.

In South Korea, bunker fuel volumes have dropped from 500,000 mt/month in September to around 400,000-450,000 mt in October, and is expected to remain low in November too.

"Our refinery will maintain its overall operating ratio below 70% in November too, so I think supply will still be tight," a source with a South Korean refiner said.

In China, supply of low sulfur marine fuel for bonded bunkering has tightened. China imports about half its bunker fuel requirements, with the other half met by domestic refiners. High cargo costs have capped imports, while domestic refiners have reduced run rates on poor margins for gasoil and low sulfur fuel oil, market sources said.

"It is the same situation across Asia," a China-based source said.

In Japan, refiners ENEOS and Cosmo have sold out for this month, with only Idemitsu available to supply in the market, sources said.

Latest data from the Petroleum Association of Japan showed that crude throughput slid further by 1% week on week to 2.21 million b/d over Oct. 11-17, with the refinery utilization rate falling to 62.9% of the capacity, Platts reported earlier.

Reflecting the tightness, delivered marine fuel 0.5%S premiums to benchmark FOB Singapore 10 ppm sulfur gasoil cargo assessments on Oct. 26 reached a six-month high of $30.45/mt at Tokyo Bay and a eight-month high of $21.95/mt at Shanghai, Platts data showed.

The same differential for delivery at Busan/Ulsan averaged $14.60/mt in October, up from $7.16/mt in September, Platts data showed.

Bunkerworld .,
27th October 2020 08:53 GMT