Asia fuel oil: Cash premiums retreat, Fujairah inventories sink to 5-month low

SINGAPORE: Cash premiums for cargoes of 0.5% very low-sulphur fuel oil (VLSFO) and 380-cst high-sulphur fuel oil (HSFO) retreated on Wednesday, following sharp gains earlier in the week that were fuelled by concerns of tightening supplies and strong demand from refiners and utilities.

A fire on Sunday at an offshore platform in Mexico that knocked out as much as 421,000 barrels per day (bpd) of heavy sour crude oil output also fuelled the bullish sentiment as it forced refiners, primarily in the United States, to seek alternative feedstocks.

Mexico’s state oil firm said it expected to resume production by Aug. 30.

380-cst HSFO cash premiums for cargoes of the fuel fell to $9.61 a tonne to Singapore quotes, down from a near seven-month high of $10.17 on Tuesday. Cash differentials for VLSFO cargoes slipped to $4.41 a tonne, down 4 cents from a more than 1-1/2 year high in the previous session.

By contrast, 180-cst HSFO cash premiums extended gains to a fresh 10-month high of $7.79 a tonne to Singapore quotes, from $7.42 in the previous session.

This came despite no physical trades in the Singapore window on Wednesday and a second day of no standing HSFO offers from suppliers.

Fuel oil inventories in the Fujairah bunkering and storage hub fell 11% to a five-month low in the week ended Aug. 23 and were down by 44% from the same period last year, data released on Wednesday showed.

The lower inventories came amid tightening supplies of both low-sulphur and high-sulphur fuel oil grades as well as firm regional demand for fuel oil in power generation, trade sources said.

Overall bunkering demand, however, remains relatively weak amid a slow tanker market and unprecedented congestion at some of the worlds busiest ports, the sources said.

Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 1.08 million barrels, or about 170,000 tonnes, to 8.69 million barrels, or 1.37 million tonnes, data via S&P Global Platts showed.

The Fujairah fuel oil stocks were last lower in the week to March 29.

According to assessments by Refinitiv Oil Research, exports from the UAE slipped to 360,000 tonnes in the week to Aug. 22, down from a one-month high of 418,000 tonnes in the prior week.

Meanwhile, Saudi Arabian fuel oil exports jumped to 370,000 tonnes in the week to Aug. 22up from a the previous weekly high of 311,000 tonnes set in May 2019, according to Refinitiv Oil Research.

“Saudi exports have been unseasonably high in recent months, supported by strong flows from the 400,000 bpd Jizan Refinery, which in a testing phase,” said Refinitiv Oil Research.

The Jizan residual fuel exports, which range between 100,000 tonnes to 200,000 tonnes per week, are sold as feedstocks to refiners in the United States, India and South Korea, according to trade sources and Refinitiv Oil Research.

Kuwait’s KPC issued a tender seeking to import a third September-delivery HSFO cargo. KPC is seeking 80,000 tonnes of 380-cst HSFO with a maximum 4% sulphur content for delivery over Sept. 23-27 in a tender closing on Aug. 25 with same day validity.