SINGAPORE: Asia’s cash premiums for 0.5% very low-sulphur fuel oil (VLSFO) hit record highs on Friday amid persisting supply tightness from the West.
The cash premiums for Asia’s 0.5% VLSFO were at $42.72 a tonne to Singapore quotes, the highest on record, according to Reuters data which goes back to late 2019.
Limited low-sulphur fuel oil arbitrage arrivals from the West and limited gasoil supply for the fuel oil blending pool have kept the market firm since the start of this year. High-sulphur fuel oil cash differentials rebounded slightly on Friday after hitting two-month lows the day before. Cash premiums for 380-cst HSFO rose to $4.88 per tonne to Singapore quotes, compared with $4.49 per tonne a day earlier. Meanwhile, cash differentials for 180-cst HSFO were at a discount of $1.79 per tonne to Singapore quotes on Friday, compared with a discount of $2.91 a tonne on Thursday.
Fuel oil stocks in the ARA refining and storage dipped 13,000 tonnes, or 1%, to 1.02 million tonnes in the week ended May. 19, data from Dutch consultancy Insights Global showed.
No HSFO trades, one VLSFO trade was reported. South Korea’s third largest refiner, S-Oil Corp, has suspended production of several processing units after a blast at its Onsan refinery, it said on Friday. This could tighten gasoline supplies and boost refiners’ margins in Asia. It may take up to two years to replace the fire-hit unit, during which time S-Oil could export Very Low Sulphur Fuel Oil, Citi analysts said in a note. China is quietly ramping up purchases of oil from Russia at bargain prices, according to shipping data and oil traders who spoke to Reuters, filling the vacuum left by Western buyers backing away from business with Russia after its invasion of Ukraine. Oil prices fell on Friday as investors worried that weakening global economic growth and tighter central bank monetary policy could curb a recovery in fuel demand.
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