SINGAPORE: Asia’s 0.5% very low-sulphur fuel oil (VLSFO) front-month time spread and crack slipped on Monday despite a tight near-term supply outlook.

VLSFO supply is “pretty tight until 2H August (while) bunker demand is steady and regional utility demand consistent,” a Singapore-based fuel oil trader said.

Still, the front-month VLSFO time spread slipped to a three-week low of $2 a tonne while the front month crack was down to a near four-week low of $11.64 a barrel above Dubai crude, Refinitiv data in Eikon showed. The weaker crack also came despite a $1 drop in benchmark crude oil prices on Monday.

Crude prices fell as concerns about fuel demand caused by the spread of COVID-19 variants as well as changes to import rules in China offset expectations of tight supplies through the rest of the year.

Overall floating storage inventories in the Malacca Strait climbed 3% to a three-week high in the week ended July 21, despite falling VLSFO supplies, according to data intelligence firm Kpler.

Total floating storage inventories rose by 98,000 tonnes to 3.03 million tonnes, the data showed.

The inventory rise came despite a 15% drop in floating inventories of IMO-compliant VLSFO to a near two-month low of 1.87 million tonnes in the week ended July 21, the Kpler data showed.