VLSFO cash premium bid higher, crack dips

SINGAPORE: Asia’s 0.5% very low-sulphur fuel oil (VLSFO) cash premium climbed on Wednesday amid firming deal values in the Singapore trading window.

The cash premium climbed to $7.50 per tonne to Singapore quotes, up from $6 in the previous session. The cash differential hit a near two-year high of $8 a tonne on Friday.

Sentiment in the VLSFO market has been boosted by tightening blendstock supplies and firming demand from utilities in north Asia.

The front-month VLSFO crack, however, slipped to a more than one-week low of $13.08 a barrel above Dubai crude, Refinitiv data showed, despite weaker crude oil prices.

Oil prices fell on Wednesday after the International Energy Agency (IEA) and OPEC warned of impending oversupply and as COVID-19 cases in Europe increased the downside risks to demand recovery, though a fall in US gasoline stocks curbed losses.

Meanwhile, fuel oil inventories in the Fujairah bunkering and storage hub climbed 4% to a near four-month high in the week ended Nov. 15, data released on Wednesday showed.

The higher inventories, which extended a 42% stock build in the previous week, came amid lower exports and easing bunker demand at the Fujairah hub, trade sources said.

Fujairah Oil Industry Zone inventories for heavy distillates and residues rose by 380,000 barrels, or about 60,000 tonnes, to 10.88 million barrels, or 1.71 million tonnes, data via S&P Global Platts showed.

Fujairah’s fuel oil inventories were 33% higher than year-ago levels, the highest year-on-year gap since August 2020.

According to assessments by Refinitiv Oil Research, exports from the UAE fell to 233,000 tonnes in the week ended Nov. 14, down from 390,000 tonnes in the prior week.

“Low sulphur bunker deliveries (in Fujairah) slowed during the week ending Nov. 15 to 136,000 tonnes,” said Refinitiv Oil Research, adding that low blendstock availability has tightened bunker supplies in Asia and the Middle East.

Gunvor bought a 20,000 tonne 0.5% very low-sulphur fuel oil (VLSFO) cargo from Trafigura at a $8 per tonne premium.

By comparison, two similar VLSFO cargoes traded earlier this week for $6 per tonne premiums. No HSFO cargo trades were reported in the Singapore trading window. Taiwan’s CPC is seeking a 40,000 tonne 0.3% low-sulphur fuel oil (LSFO) cargo for delivery in December.