SINGAPORE: Lifted by tighter supplies and firm demand since the start of the year, refining margins of Singapore 180-cst fuel oil to Dubai crude in Asia flipped to a premium on Wednesday for the first time since January 2012.
FUEL OIL CRACKS
- Fuel oil supplies declined after OPEC members focused their crude cuts on grades that yield the most fuel oil.
- Investments into refinery upgrades in places such as India and Russia also cut supply.
- Robust fuel oil consumption this year also seen rising in the next months as demand from utilities rises to meet cooling requirements.
- A recent rout in crude prices also supportive for refining margins.
- "Fuel oil prices are known to be sticky and cracks usually get a boost when crude prices fall," Nevyn Nah at Energy Aspects said.
- The spread between the 180-centistoke fuel oil swap and Dubai crude for July was a premium of 27 cents a barrel, Reuters data showed.
- This is the first time the residual fuel has been at a premium to Dubai since January 2012. Prior to that, the margin was last at a premium in 2003.
- The margin averaged a discount of $3.09 in 2017 and averaged minus $5.37 last year.
- Broker sources pegged the July barge crack to Brent crude at minus $4 a barrel on Wednesday.
- One broker said this is the highest level for the front-month crack he had seen.
WINDOW TRADES
- Four cargo trades were reported in the Platts window, totalling 20,000 tonnes of 180-cst fuel oil and another 60,000 tonnes of 380-cst fuel oil.
- A total of 1.06 million tonnes of fuel oil have traded in the window since the start of June, against 1.94 million tonnes in May.
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FUJAIRAH INVENTORIES
- In the United Arab Emirates, the Fujairah Oil Industry Zone (FOIZ) fuel oil inventories were up 5 percent in the week to June 12 at 11.704 million barrels after rising 555,000 barrels, data via S&P Global Platts showed.
- Fuel oil inventories in the Fujairah hub are now at their lowest since the beginning of April.
- Traders said bunker fuel sales in Fujairah may have come under pressure recently since the Emirate issued a ban Qatari-linked vessels from entering its ports.
- On Monday, Qatar Petroleum said it made available a vessel-borne fuelling facility for all ships lifting any Qatari seaborne imports or exports.
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