SINGAPORE: Asia’s refining margins for high sulphur fuel oil continued to hover near multi-year lows this week as the global market remains awash with supply.

The front-month 180cst-HSFO crack was pegged at minus $20.57 per barrel at the Asia close (0830 GMT) on Wednesday, Refinitiv data showed. It sank to a multi-year low of minus $21.60 per barrel on July 22.

While HSFO cash differentials recovered slightly in the second half of July, the uptick remains capped as supplies arriving at the East of Suez were still ample for meeting demand.

Incoming HSFO supplies from the Middle East have been steady in the past months, while Russian inflows are also likely to remain high into August.

This comes after a recent change in the European Union’s provisions on Russian-origin oil, which will allow Russian state-owned companies to conclude deals with EU members on the transport of oil to third countries.

The move could potentially open the floodgates for more Russian barrels to flow East directly and by-passing ship-to-ship transfer operations in the Mediterranean, said Emril Jamil, Refinitiv’s senior fuel oil analyst for Asia.

Inventories of heavy distillates climbed to a 13-month high at the Middle Eastern trading hub of Fujairah this week, reflecting a supply build and slowing downstream demand.

Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues rose 2% from the previous week to 12.81 million barrels (2.02 million tonnes) in the week ended July 25, latest data from S&P Global Commodity Insights showed.