SINGAPORE: Asia’s 0.5% very low-sulphur fuel oil (VLSFO) rallied higher on Wednesday, with cash premiums and front-month timespreads scaling new highs.

Cash premiums for Asia’s 0.5% VLSFO were at $47.50 a tonne to Singapore quotes on Tuesday, striking a record high, according to Reuters pricing data.

Backwardation in the VLSFO market also firmed, with the front-month timespread hitting a record high of $44.75 per tonne on Wednesday, widening sharply versus $37.50/mt on Tuesday, Refinitiv data in Eikon showed.

“Western arbitrage volumes are in line to close well-below the pre-invasion average of 2.05 million mt/month. Tightened supply in Europe due to the loss of Russian barrels, as well as a steeply backwardated market, has discouraged arbitrage to Asia,” Refinitiv Oil Research analysts wrote in a note this week.

Meanwhile, the 180cst high-sulphur fuel oil (HSFO) market held steady on the back of robust demand expectations, even as signs of more supply replenishment capped gains.

The cash differentials for 180-cst HSFO rose to a premium of $1.58 per tonne to Singapore quotes, versus 26 cents per tonne a day earlier.

Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues climbed 5% from the previous week to 10.90 million barrels (1.72 million tonnes) in the week ended May 23, data via S&P Global Commodity Insights showed.

Oil prices rose on Wednesday, boosted by tight supplies and the prospect of rising demand from the upcoming start of the US summer driving season.

Glencore Plc said on Tuesday it anticipates paying up to $1.5 billion to settle accusations of bribery and market manipulation, as authorities in the United States, Britain and Brazil announced that three of the company’s subsidiaries were pleading guilty to crimes.