SINGAPORE: Asia's 0.5percent very low-sulphur fuel oil (VLSFO) cash premiums and front-month time-spreads slipped on Monday, retreating from recent highs as traders took stock of market fundamentals.
The VLSFO market rose to multi-month highs in the beginning of July as supply outlook tightened, trade sources said.
But ample supplies in North Asia may keep a lid on gains as suppliers in China compete to clear inventories as refiners hold VLSFO production levels steady, the sources said.
The VLSFO cash premiums slipped to a one-week low of $1.39 a tonne to Singapore quotes, down from a near four-month high of $2.17 a tonne on Wednesday.
The front-month time-spread slipped to $2.75 a tonne on Monday, down from a near four-month high of $3.25 a tonne recorded in the previous week, Refinitiv data in Eikon showed.
Trafigura sold a 40,000-tonne 0.5percent very low-sulphur fuel oil (VLSFO) cargo from Trafigura. Vitol bought a 20,000-tonne 180-cst high-sulphur fuel oil (HSFO) cargo from Glencore.
Overall floating storage inventories in the Malacca Strait fell 6percent to a near four-month low in the week ended July 14, led by a drop in VLSFO supplies, according to data intelligence firm Kpler.
Total floating storage inventories fell by 182,000 tonnes to 2.83 million tonnes, the data showed.
This inventory slump came as floating inventories of IMO-compliant VLSFO dropped 5percent to a 1-1/2-month low of 2.09 million tonnes in the week ended July 14, the Kpler data showed.
Stocks of HSFO dropped 12percent, or 22,000 tonnes, from the previous week to 163,000 tonnes while stocks of residual fuels with unspecified sulphur contents dropped 7percent, or 45,000 tonnes, to 577,000 tonnes, the data showed.
China's fuel oil output climbed to 3.85 million tonnes in June, up 1percent from the same period last year, according to the latest data from the National Bureau of Statistics.
In the first six months of the year, China's fuel oil production totalled 18.76 million tonnes, an increase of 7percent over the same period last year, the data showed.
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