SINGAPORE: Asia's 0.5% very low-sulphur fuel oil (VLSFO) edged higher on Friday, clawing back most of the week's losses amid weekly regional inventory declines.
Soaring inventories and sluggish demand from both the bunkering and power generation sectors have hammered Asia's residual fuel market complex has been hammered in recent weeks.
But the upside to market sentiment in the near term may be capped by weak spot bunkering demand and ample supplies amid expectations of steady arbitrage inflows in June, trade sources said.
The VLSFO front-month time spread rose to $2 per tonne on Friday, up 50 cents from Monday, while the front-month crack to Dubai crude rose to $10.50 a barrel from $9.92 a barrel at the start of the week, Refinitiv data in Eikon showed.
Despite a persistent absence of deal activity in the Singapore window, the VLSFO cash discount also narrowed to minus $2.75 a tonne to Singapore quotes on Friday after hitting a near nine-month low earlier in the week and down minus $2.91 on Monday.
Residual fuel inventories at the Amsterdam-Rotterdam-Antwerp (ARA) storage hub were virtually unchanged this week, while those in the Singapore and Fujairah hubs fell, official data showed.
Fuel oil stocks in the ARA refining and storage rose by 6,000 tonnes to 1.22 million tonnes in the week ended May 27, data from Dutch consultancy Insights Global (IG) showed.
Compared with last year, the inventories at the ARA hub were 27% lower and slightly below the five-year seasonal average of 1.26 million tonnes.
In the Fujairah hub, fuel oil stockpiles were 13% lower to an six-week low of 11.87 million barrels, or 1.87 million tonnes in the week to May 24 amid firm export volumes.
In Singapore, fuel oil inventories fell 8% to a nine-week low of 22.88 million barrels, or 3.6 million tonnes, as net import volumes dropped to a 2021 low.
No VLSFO or high-sulphur fuel oil (HSFO) cargo trades were reported in the Singapore trading window.
Overall residual fuel trading volumes in the window have fallen sharply in May to the lowest monthly volumes since at least the start of 2016, or as far as available records go, at just 200,000 tonnes so far.
This compares with a total of 320,000 tonnes traded in May last year and an average monthly traded volume of 616,000 tonnes in 2020.
Containerized imports to the US from Asia jumped by 31% in April from the same month in 2020 and up 27% from April 2019, PIERS by IHS Markit said in a note on Friday.
"April 2021 was the busiest April on record and the 10th consecutive month of year-over-year growth," said IHS Markit, adding imports from China were particularly strong with an increase of 40% from April last year.
"The container import boom shows no sign of slowing as lockdown eases and spending on consumer goods, especially online shopping. This high volume is set to stay with us for the months ahead as the economy recovers," said Brendan Neary, associate director at PIERS by HIS Markit.
"Shipping capacity is only going to get tighter in the coming weeks as retailers bring in traditional peak season volumes to support the winter holiday shopping season.
The unrelenting import volumes will add pressure on seaports and inland rail hubs, delaying cargoes and raising total shipping costs," said Mark Szakonyi, executive editor at The Journal of Commerce by IHS Markit.
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