SINGAPORE: Asia’s very low sulphur fuel oil (VLSFO) market remained firm on Tuesday, buoyed by tight supplies amid expectations of less arbitrage inflows into Asia for June compared with May.

Cash differentials for 0.5% VLSFO climbed for a fifth consecutive day to new record-high premiums of $74.49 per tonne to Singapore quotes, extending an uptrend from last week, Reuters data showed.

Fuel oil flows from the West to East Asia are currently pegged below 1 million tonnes in June, lower than the 1.9 million tonnes in May, based on Refinitiv Oil Research assessments this week.

The market also tracked bullish sentiment in upstream crude, after the European Union agreed to slash oil imports from Russia by the end of this year.

“An EU embargo on Russian fuel oil will threaten 1.1 million MT/month of imports currently arriving to major EU importing countries, threatening supplies of refinery feedstocks and marine bunker fuel,” Refinitiv Oil Research analysts wrote in a report published on Monday.

This means Europe could potentially cut exports to Asia as they keep more fuel oil production for domestic use.

One 380cst HSFO trade was reported - One 0.5% VLSFO trade was reported. Oil prices gained on Tuesday after the EU agreed to slash oil imports from Russia, fuelling worries of a tighter market already strained for supply amid rising demand ahead of the peak US and European summer driving season.

EU leaders agreed in principle on Monday to cut 90% of oil imports from Russia by the end of this year, resolving a deadlock with Hungary over the bloc’s toughest sanction yet on Moscow since the invasion of Ukraine three months ago.

Top oil exporter Saudi Arabia may raise prices of all grades of crude it sells to Asia in July following strong refining margins for gasoline and jet fuel, while expectations of a rebound in China’s demand also supported prices.