Singapore 380 CST HSFO prompt backwardation widens to 9-month high
2nd November 2020 05:39 GMT

The prompt Singapore November-December 380 CST high sulfur fuel oil swap backwardation widened to a nine-month high on Oct. 30, Platts data showed, as refiners continue to operate their refineries at reduced rates.

The November-December 380 CST HSFO spread widened 65 cents/mt day on day to $3.50/mt, at the 0830 GMT Singapore close on Oct. 30, Platts data showed. This is the widest the prompt time-spread has been assessed at since Jan. 31, when the the derivative spread was assessed at $6.50/mt.

"The HSFO market is strong. Refiners are cutting their run rates... we still see demand from Pakistan. Demand from the power sector is still strong," a fuel oil trader said.

Refiners have been reducing their run rates due to weak middle distillate margins, which has had the twin-effect of shrinking fuel oil supply. Asian refiners are said to be operating their refineries at around 70% of capacity. Even though the fuel oil crack spread had risen in the recent months, Asian refiners are unlikely to raise their run rates because of poor middle distillate margins.

Pakistani demand for the 180 CST HSFO grade spiked when Pakistan State Oil issued tenders to buy 520,000 mt of the grade for December delivery in a bid to fill the gap formed due to the decline in domestic gas production. Bangladesh has also continued to purchase the 180 CST HSFO grade, buying a hefty 250,000 mt for November due to high LNG prices. Supply tightness for the 180 CST HSFO grade is providing support for the 380 CST HSFO grade as well, market sources said.

The 180 CST HSFO November-December time spread was assessed at $4/mt on Oct. 30, up 65 cents/mt from Oct. 29, Platts data showed.

Bunkerworld .,
2nd November 2020 05:39 GMT