Asia Fuel Oil-Cracks jump to 2-1/2 year high as inventories dive

SINGAPORE: Fuel oil refining margins soared to a 2-1/2 year high on Thursday as onshore inventories of fuel oil in Singapore dove to a 2-1/2 year low and bullish fundamentals continued to lend support.

Buying interest for 380-cst cargoes, meanwhile, re-emerged in the Platts window and lifted the fuel's cash premiums to their highest in nearly three weeks.

REFINING MARGINS

- The June refining margin for FOB Rotterdam barge fuel oil to Brent crude on the Intercontinental Exchange (ICE) jumped to minus $5.90 a barrel by 1730 Singapore time (0930 GMT), up from minus $6.30 a barrel in the previous session.

- By comparison, the front month refining margin was trading on ICE at about minus $7.50 a barrel on May 30.

- Fuel oil refining margins have mostly traded well above the five-year average since OPEC first began implementing its production cut agreement at the start of 2017, which limited supplies of heavy crudes that tend to yield larger quantities of fuel oil than light crudes.

- Firm seasonal demand and structural declines in supply have also helped to boost refining margins of the industrial fuel.

SINGAPORE INVENTORIES

- Singapore onshore fuel oil inventories fell 8 percent, or 227,000 tonnes, to a total of 2.62 million tonnes in the week to June 7, official data showed on Thursday.

- That was the lowest level since November 2014 and despite a 7 percent increase in Singapore net imports to a three-week high of 0.83 million tonnes.

- Traders said movement of volumes between storage tanks and into floaters is likely to have contributed to inventory draws amid below-average spot bunker demand in the past week.

WINDOW TRADES

- Six cargo trades were reported in the Platts window, totalling 140,000 tonnes of 380-cst fuel oil.

- Hin Leong bought 80,000 tonnes of the fuel while Trafigura lifted 60,000 tonnes.

- Glencore sold three of the cargoes. Coastal, Lukoil and PetroChina sold one each.

- All of Thursday's deals were concluded at $288 a tonne.

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