Asia residual fuels: Key market indicators for April 25-29
25th April 2022 10:15 GMT

The Singapore fuel oil market is likely to see support both in low- and high-sulfur grades in the April 25-29 trading week due to tight supply.

Singapore marine fuel 0.5%S is expected to see supply tightness in sulfur cutter stocks, while the prevailing specification issue is lending support.

Crude oil futures opened higher in Asia on April 25, with June ICE Brent trading at $103.63/b at 0300 GMT, down from $107.03/b at the Asian close April 22.

Marine Fuel 0.5%S

** Marine fuel 0.5%S market continued to see supply tightness in sulfur cutter stocks as they are taken by gasoil market, which has higher crack spread. Cargo inflow from the West in May is unlikely to rise significantly from April.

** The downstream low sulfur bunker fuel market was unlikely to witness significant upside from the lofty levels it had reached in the recent past as spot trading activity gathers pace for May-delivery product.

** A tight availability situation of finished grade product especially for delivery on a prompt basis, which had led the differential -- to benchmark upstream Singapore Marine Fuel 0.5% cargo -- for IMO-compliant marine fuel sold in Singapore on a delivered basis to rise to a 26-month high of $36.36/mt in the recent past, was likely to ease off, even if slightly, going into May.

** Meanwhile, a still-prevailing steep backwardation at the front of the Singapore marine fuel 0.5% swaps curve was likely to instigate sellers in the downstream market -- especially those that offer product on an ex-wharf basis -- to make competitive offers in a bid to move oil, traders said.

** As such, the premium for Singapore-delivered marine fuel 0.5% bunker averaged $32.91/mt in the week ended April 22, down from the previous week's average of $34.18/mt, while the same for product sold on an ex-wharf basis has inched lower to average $24.11/mt, down from the previous week's average of $25.98/mt, S&P Global Commodity Insights data showed.

** Zhoushan-based bunker suppliers anticipate rising demand for LSFO bunkers to steady delivered premiums amid the healthy volume of inquiries for April and May delivery dates, while sporadic cargo arrivals have supplemented downstream product availability.

 

High sulfur fuel oil

 

** The 380 CST grade is expected to remain supported over April 25-29 on the back of specification issues, as off-spec high sulfur bunker fuel cargoes are still floating around the world's largest bunkering hub, market sources said.

** Strong demand for Middle Eastern cargoes by US refiners reduces high sulfur fuel oil cargo inflow to Asia. Most of the six cargoes sold by Saudi Aramco for May loading from Ras Tanura are heading for the US, market sources said.

** On the high sulfur marine fuel front though, the premium -- over Singapore 380 CST high sulfur fuel oil cargo assessment -- for 380 CST bunker fuel delivered in Singapore was unlikely to see any significant downside from its prevailing multi-year highs.

** Traders attributed this to tight availability of finished grade product amid prevailing concerns over contaminated fuel at the city-state, which had limited the number of suppliers to source product from.

** Even as there were initial signs that the tight prompt availability situation was likely to ease as spot market activity picks up pace for May-delivery product, the earliest that most suppliers are able to offer product to the spot market on a delivered basis is around 9-11 days forward.

** This in turn was likely to limit any major downside to Singapore-delivered 380 CST high sulfur bunker premium. The premium for Singapore-delivered 380 CST high sulfur bunker has surged to an average of $81.38/mt in the week ended April 22, up from the previous week's average of $57.13/mt, S&P Global data showed.

** Supply tightness in Singapore is diverging bunker demand to North Asia. Amid above-average HSFO bunker demand, uncertainties over the availability of replenishment stocks led suppliers in Hong Kong to expect a prolonged tightness in upstream inventories, local bunker suppliers said.

** Narrower price spreads of South Korea-delivered 380 CST HSFO versus the same grade in Singapore is likely to help buoy HSFO bunker demand and drawdown inventories at the North Asian port, as limited prompt supplies in Singapore also led more buyers to meet requirements in South Korea, local traders said. The South Korea-Singapore HSFO spreads narrowed to seven-year lows of minus $5/mt April 13-18, the data showed.


Platts ,
25th April 2022 10:15 GMT