VLSFO crack recovers weekly losses but remains within range

SINGAPORE: Asia’s 0.5% very low-sulphur fuel oil (VLSFO) front-month crack firmed on Friday, climbing to a more than one-week high of $11.71 a barrel above Dubai crude following five straight sessions of narrow losses previously, Refinitiv data in Eikon showed.

The refining margin was up by 30 cents a barrel from Thursday but remained firmly within a tight trading range of $11 to $12 over the past three weeks as participants look for signs of drawing supplies or improved bunkering demand.

The firming VLSFO crack, however, came despite firming crude oil prices higher on Friday and were on track for a fifth consecutive weekly gain, on expectations that demand growth would outstrip supply and OPEC+ producers would be cautious in returning more output to the market from August.

Meanwhile, residual fuel inventories at the Amsterdam-Rotterdam-Antwerp (ARA) and Fujairah storage hubs climbed this week, while those in Singapore slipped, official data showed.

Fuel oil stocks in the ARA refining and storage rose 1%, or 20,000 tonnes to an eight week high of 1.51 million tonnes in the week ended June 24, data from Dutch consultancy Insights Global (IG) showed.

Compared with last year, however, the inventories at the ARA hub were 1% lower and were well above the five-year seasonal average of 1.29 million tonnes.

In the Fujairah hub, fuel oil stockpiles were 5% higher to a two-week high of 12.94 million barrels, or 2.04 million tonnes in the week to June 21 amid rising export volumes and sluggish bunkering demand.

In Singapore, fuel oil inventories fell 2% to a four-week low of 23.4 million barrels, or 3.69 million tonnes, as net import volumes remained weak.

No VLSFO or high-sulphur fuel oil (HSFO) cargo trades were reported in the Singapore trading window for a third straight session.

Sri Lanka’s Ceypetco offered a 25,000 tonne cargo of low-sulphur fuel oil with a maximum 175-cst viscosity and a maximum 2% sulphur content loading from Colombo over July 18-19 in a tender closing on June 29 with a three-day validity.

Ceypetco, which mostly imports fuel oil for power generation, rarely exports fuel oil cargoes. It offered to export a similar fuel oil cargo in November 2019.

The unusual export follows ample hydroelectric power generation supply Sri Lanka amid increased monsoon rains, trade sources said.