SINGAPORE: Cash differentials in Asia’s fuel oil market edged slightly higher on Thursday despite muted trading activity, as a tight supply outlook kept prices range-bound this week.
Premiums for 0.5% VLSFO were at $63.55 per tonne to Singapore quotes on Thursday, versus $62.17 per tonne the previous day.
While 0.5% VLSFO premiums eased from record highs touched last week, robust gasoil margins and limited arbitrage supplies continued to provide a price floor.
With gasoil and jet fuel margins hovering near record highs this week, refiners are likely to maximise middle distillate production, instead of allocating supply to the fuel oil blending pool. This is expected to keep VLSFO supply tight for the near term, market sources said.
Meanwhile, high sulphur fuel oil discounts narrowed slightly on the day, as growing peak utlity demand from the Middle East and South Asia provided some support to sentiment.
Cash differentials for 180-cst HSFO were at discounts of $7.19 per tonne to Singapore quotes on Thursday, versus discounts of $8.18 per tonne on Wednesday. 380-cst HSFO differentials were at discounts of $1.16 per tonne to Singapore quotes on Thursday, versus discounts of $1.71 per tonne on Wednesday.
Singapore fuel oil stocks climbed 4% to a seven-week high of 21.422 million barrels in the week to June 8, data from Enterprise Singapore showed Thursday.
Oil prices reversed earlier gains on Thursday after parts of Shanghai imposed new COVID-19 lockdown measures, outweighing news of China’s stronger-than-expected exports in May.
Parts of Shanghai began imposing new lockdown restrictions on Thursday, with residents of sprawling Minhang district ordered to stay home for two days in a bid to control COVID-19 transmission risks.
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