SINGAPORE: Cash differentials for Asia’s 0.5% very low-sulphur fuel oil (VLSFO) and both grades of high-sulphur fuel oil (HSFO) all flipped to a premium on Thursday, from discounts in the previous session, amid firmer buying interest and expectations of gradually tightening supplies, trade sources said.
“Global fuel oil markets look increasingly tight,” said Energy Aspects in a note on Thursday, adding that soaring crude values have decimated topping margins globally, limiting fuel oil supply.
“Tightness in fuel oil markets could reach its nadir this summer as refinery works are completed while new refining capacity is brought online,” said the research consultancy.
Some industry players, however, were sceptical of a near-term tightness in supply.
“Plenty of oil on its way,” said one industry participant.
This also came as official data on Thursday showed Singapore residual fuel oil inventories climbed 2% in the week ended June 30, rising for the first time in three weeks, as net import volumes rebounded from recent lows.
Onshore fuel oil stocks rose by 547,000 barrels, or about 86,000 tonnes, to a two-week high of 23.95 million barrels, or 3.77 million tonnes, Enterprise Singapore data showed.
Compared with a year earlier, the residual fuel stocks were 5% lower, but slightly above the 2021 weekly average of 23.27 million barrels.
Singapore net imports of fuel oil were up 92% on-week to a three-week high of 622,000 tonnes, but were still below the 2021 weekly average of 726,000 tonnes. Weekly figures, however, are volatile. The largest net imports were from Malaysia at 230,000 tonnes, followed by Iraq at 136,000 tonnes, Egypt at 124,000 tonnes, the highest since February 2020, and the United Arab Emirates at 105,000 tonnes.
Destinations of Singapore’s top fuel oil net exports were China at 121,000 tonnes, the most in six months, followed by Hong Kong at 60,000 tonnes and Bangladesh at 55,000 tonnes.
Fuel oil exports from Singapore and Malaysia fuel oil storage hubs have climbed recently amid increased demand for marine fuels from independent suppliers and refining feedstocks, trade sources said.
Singapore fuel oil exports to China surged to about 339,000 tonnes in June, compared with 65,000 tonnes in May and 57,000 tonnes in April, the Enterprise Singapore data showed.
Fuel oil flows into east Asia, most of which come to Singapore, for July were assessed at between 4.8 million tonnes and 5.2 million tonnes and are similar to June volumes, the latest assessments by Refinitiv Oil Research on Tuesday showed. BP sold a 40,000-tonne VLSFO cargo to Gunvor at a $1.50 per tonne premium to Singapore quotes.
On June 29, when a similar cargo last traded, it was sold at a discount equivalent to about 70 cents a tonne to Singapore quotes, Reuters calculations showed. No HSFO cargo trades were reported.