SINGAPORE: The very low sulphur fuel oil (VLSFO) market in Asia kicked off strongly on Monday as supply tightness persisted, with cash premiums heading towards record highs seen earlier this month.

Cash differentials for 0.5% VLSFO were at premiums of $72.62 per tonne to Singapore quotes on Monday, climbing more than 10% week-on-week. The premiums were at record highs of $79.23 per tonne on June 2, Reuters data showed.

The front-month market structure for 0.5% VLSFO swaps also retained a strong backwardation of over $50 per tonne on Monday, while July cracks have also extended steady gains since mid-June. Strong backwardation and high freight rates continued to deter arbitrage inflows from the West, trading sources said, while tight gasoil supplies also limited components for the fuel oil blending pool, adding to further supply tightness.

Meanwhile, the high sulphur fuel oil market was little changed at the start of the trading week, as a wide buy-sell gap limited trade activity.

180-cst HSFO differentials were at discounts of $7.10 per tonne to Singapore quotes on Monday, widening slightly versus discounts of $7.05 per tonne on Friday.

Oil prices rose on Monday in volatile trade, reversing earlier losses, as tightening supplies outweighed concerns about slowing global economic growth and fuel demand. Front-month prices tumbled 7.3% last week, their first weekly fall in five.

China’s exports of very-low-sulphur marine fuel rebounded 15% in May versus April as the country’s merchandise exports recovered, but still stood nearly 10% below the year-ago level, customs data showed on Monday.