SINGAPORE: Asia’s 0.5% very low-sulphur fuel oil (VLSFO) crack against Dubai crude rebounded from a near three-month low on Wednesday due to weaker crude oil prices.
The February VLSFO crack was at $11.44 a barrel above Dubai crude prices on Wednesday, down from a near three-month low of $11.20 a barrel in the previous session, data from Refinitiv Eikon showed.
The front-month VLSFO crack versus Dubai dropped 22% in March amid improved regional supplies and rising arbitrage inflows.
Oil prices fell on Wednesday on concerns about the market’s recovery after OPEC and its allies lowered their 2021 demand growth forecast, although strong Chinese factory activities lent some support.
Meanwhile, fuel oil inventories in the Fujairah bunkering and storage hub jumped 16% in the week to March 29, rebounding from a more than two-year low in the week before, data released on Wednesday showed.
Fujairah Oil Industry Zone inventories for heavy distillates and residues jumped by 1.121 million barrels, or about 177,000 tonnes, to a four-week high of 8.236 million barrels, or 1.297 million tonnes, data via S&P Global Platts showed.
Lower export volumes and resumed output at the local Uniper plant helped lift the Fujairah fuel oil inventories higher amid firm bunkering demand, trade sources said.
“Availability is good and demand is good,” said a Dubai-based bunker trader.
Still, Fujairah’s fuel oil inventories were 43% lower than year-ago levels.
According to assessments by Refinitiv Oil Research, exports from the UAE fell to 235,000 tonnes in the week ended March 28, down by 193,000 tonnes from the previous week and well below the 2021 weekly average of 362,000 tonnes.
“The slow-down in exports gave some much needed respite to load rates in Fujairah, which saw inventories hit record lows last week,” Refinitiv Oil Research said in a report.
China’s Shanghai Futures Exchange said on Wednesday that its low-sulphur fuel oil futures contract had been used as a price benchmark for the first time in international trade.
Freepoint Commodities Singapore Pte Ltd had signed the contracts with Chimbusco International Petroleum (Singapore) Pte. Ltd, China Merchants Energy Trading (Singapore) Pte. Ltd and COFCO International Freight SA, the exchange said in a statement.
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