SINGAPORE: Asia’s cash premiums for 0.5% very low-sulphur fuel oil (VLSFO) rose on Wednesday amid active buying interest in the physical market, while the front-month crack for the marine fuel grade slumped to a two-month low.
Cash premiums for Asia’s 0.5% VLSFO rose to $11.88 a tonne to Singapore quotes, compared with $10.43 per tonne a day earlier.
The front-month VLSFO crack dropped to $12.80 per barrel against Dubai crude during Asian trading hours, a level not seen since Nov. 5. The crack was at $13.27 a barrel on Tuesday.
Increasing supplies from China would likely weigh on the regional fuel oil market in coming months, market watchers said.
China has issued 6.5 million tonnes of quotas for exporting low-sulphur fuel oil, used primarily as marine bunker fuel, under the first allotment for 2022. The allowance is 30% higher from the 5 million tonnes released in the first batch of 2021. Meanwhile, the 380-cst HSFO barge crack for January traded at a discount of $12 a barrel to Brent on Wednesday, while cash differentials for 380-cst high sulphur fuel oil (HSFO) were at a discount of 55 cents per tonne to Singapore quotes.
Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues rose 6.4%, or 606,000 barrels (about 90,000 tonnes), from the previous week to 10.1 million barrels (1.5 million tonnes), data via S&P Global Platts showed. Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 13% lower.
Fuel oil stocks at FOIZ averaged 10.3 million barrels in 2021, compared with a weekly average of 12.9 million barrels in 2020, Reuters calculations showed.
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