Asia Fuel Oil-380-cst crack widens as crude prices climb

Shoaib Ur Rehman July 24, 2019

SINGAPORE: The front-month 380-cst high-sulphur fuel oil (HSFO) barge crack widened its discount to Brent crude on Wednesday amid rising crude oil prices.

The August 380-cst HSFO barge crack to Brent fell to about minus $8.85 a barrel, down from minus $8.65 a barrel in the previous session, broker sources said.

The front-month crack value is now at a more than one-month low, according to Refinitiv data in Eikon.

Oil prices nudged higher on rising tensions over Iran, a sharp fall in US crude stocks and positive signs on Sino-US talks, although worries about weak demand kept a cap on gains.

ARBITRAGE

Total fuel oil flows into East Asia for July are expected to be firmly higher versus June’s 4.62 million tonnes with overall arbitrage volumes anticipated in the 5.5-6 million tonne range in July, according to a weekly Refinitiv Oil Research report released on Tuesday.

The higher July inflows were attributed to an increase in Western volumes, pegged at 2.503 million tonnes, and elevated July arrivals from the Middle East which reached one of their highest historically with 2.505 million tonnes assessed to date, according to Refinitiv Oil Research fixture data.

The elevated inflows from the Middle East were a result of a strong demand pull from Singapore amid supply shortages in the city-state as well as sluggish marine fuels demand in the Fujairah oil hub following recent attacks on several oil tankers in the region.

FUJAIRAH STOCKS

Inventories for heavy distillates and residues in the Fujairah Oil Industry Zone (FOIZ) jumped 14pc in the week to July 22, up by 1.195 million barrels (or about 178,000 tonnes), from the previous week to a two-week high of 9.795 million barrels (1.462 million tonnes), data via S&P Global Platts showed.

Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were 4pc lower.

Fuel oil stocks at FOIZ have averaged 9.981 million barrels, or 1.49 million tonnes, so far in 2019, Reuters calculations showed. This compares with a weekly average of 7.9 million barrels, or 1.18 million tonnes, in 2018.

WINDOW TRADES

Two cargoes of 380-cst grade were traded, both of which were bought by Hin Leong.

One cargo was scheduled for Aug. 8-12 loading and was sold by PetroChina at $415 a tonne, while the other parcel for Aug. 13-17 loading was sold by Glencore at $407.

No 0.5pc low-sulphur fuel oil (LSFO) cargo trades were reported.

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TENDERS

Kuwait’s KPC has offered two 40,000 tonne cargoes of 380-cst HSFO both loading on Aug 5-6 in a tender closing on July 24 with same day validity.

One of the KPC cargoes is for 380-cst bunker-spec HSFO with a maximum 3.5pc sulphur content and the other is for heavy 380-cst HSFO with a maximum 4.2pc sulphur content.

Lanka IOC on the other hand was looking to buy a small parcel of 9,000 tonnes of 380-cst grade with 3.5pc sulphur level for delivery at Trincomalee through a tender due to be awarded on July 15.

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REFINING MARGINS

South Korea’s S-Oil, South Korea’s third-largest refiner, said inventory build-up ahead of the implementation of new shipping rules in 2020 will support refining margins in the third and fourth quarters.

The refiner also said it will shut down its No.1 residue fluid catalytic cracker (RFCC) for maintenance in the third quarter.

Copyright Reuters, 2019

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