SINGAPORE: Cash differentials in Asia’s high sulphur fuel oil (HSFO) market held steadily in discounts on Tuesday, as ample supply outweighed any price recovery coming from more power generation demand.

Fuel oil supply from the Middle East to Asia has been consistent in the year, with June arrivals pegged between 2-2.5 million tonnes for June, stable from the monthly average of 2.3 million tonnes in the year so far, Refinitiv data showed.

This comes despite an uptick in fuel oil demand from the power utilities sector, particularly from the Middle East and South Asia as seasonal demand peaked from May to July.

The 180-cst HSFO differential was at a discount of $1.06 per tonne to Singapore quotes on Tuesday, edging higher for a fifth consecutive trading day but remaining stuck in discounted territory.

Bunkering demand for HSFO has also been average in the month, leaving Singapore ex-wharf 380-cst bunker premiums hovering in single digits above Singapore quotes.

In contrast, supply tightness continued to keep differentials elevated for the very low sulphur fuel oil (VLSFO) market.

The 0.5% VLSFO cash differential retreated slightly to $77.08 per tonne over Singapore quotes on Tuesday, after climbing to near record highs on Monday.

Oil prices rallied for a third day on Tuesday as major producers Saudi Arabia and the United Arab Emirates looked unlikely to be able to boost output significantly, while political unrest in Libya and Ecuador added to supply concerns.

Sri Lanka will allow companies from oil-producing countries to import and sell fuel, the power and energy minister said on Tuesday, ending a duopoly as it tries to overcome a shortage of petrol and diesel that is exacerbating an economic crisis.

Japan baked under scorching temperatures for a fourth successive day on Tuesday, as the capital’s heat broke nearly 150-year-old records for June and authorities warned power supply remained tight enough to raise the spectre of cuts.