Asia Fuel Oil: VLSFO cash differential drops, erasing weekly gains – Markets

SINGAPORE: Cash differentials for cargoes of Asia’s 0.5 percent very low-sulphur fuel oil (VLSFO) dropped on Friday, forfeiting weekly gains, as concerns over ample supplies and sluggish demand weighed on sentiment.

VLSFO cash discounts were near parity, a one-and-a-half-month high, on Thursday but dropped to a discount of 68 cents a tonne on Friday.

While the cash differential has risen steadily from near nine-month lows of minus $3 a tonne in late-May as some inventories were cleared, supplies remain ample amid expectations of steady arbitrage inflows and relatively weak bunker demand in the Singapore hub.

Fuel oil flows into East Asia, most of which come to Singapore, were assessed at between 5 million tonnes and 5.5 million tonnes in June, steady-to-higher from the 5.11 million tonnes in May and firmly higher from the 2020 monthly average of 4.82 million tonnes, the latest assessments by Refinitiv Oil Research showed.

Residual fuel inventories at the Amsterdam-Rotterdam-Antwerp (ARA) storage hub jumped to a seven-week high this week, while those in the Singapore and Fujairah hubs dropped, official data showed.

Fuel oil stocks in the ARA refining and storage jumped by 13percent, or 175,000 tonnes, to 1.49 million tonnes in the week ended June 17, data from Dutch consultancy Insights Global (IG) showed.

Compared with last year, however, the inventories at the ARA hub were 13percent lower but were above the five-year seasonal average of 1.34 million tonnes.

In the Fujairah hub, fuel oil stockpiles were down 11percent to a three-week low of 12.36 million barrels, or 1.95 million tonnes, in the week to June 14 amid limited imports.

In Singapore, fuel oil inventories also fell 11percent to a three-week low of 23.98 million barrels, or 3.78 million tonnes, as net import volumes nearly halved.

Two VLSFO cargo trades were reported in the window totalling 60,000 tonnes. Freepoint bought both cargoes, lifting 40,000 tonnes from Mercuria and the remaining 20,000 tonnes from Shell. One 180-cst high-sulphur fuel oil (HSFO) cargo trade was reported which Vitol sold to Shell. The 80,000 tonnes of fuel oil trade on Friday was the highest daily volume since May 10.

Brent crude’s premium to Dubai quotes rose on Friday to the highest in 21 months on the back of stronger demand this summer, effectively keeping Atlantic Basin grades out of Asia’s reach, according to traders and Refinitiv data.