SINGAPORE: Asian fuel oil demand, especially in the shipping fuel bunker sector, could revive due to lower underlying prices, industry sources said on Wednesday.
Liquidity increased with Vitol snapping up 60,000 tonnes of the 80,000 tonnes traded.
China's fuel oil demand is stable but it could increase in the near future after underlying crude oil prices fell about 5 percent since Monday, a trader familiar with the Chinese market said.
But high import taxes and the approval of independent refinery Shandong Dongming Petrochemical Group Co Ltd to import 150,000 barrels per day (bpd) of crude oil a year could limit flows, a second trader said.
Shandong is the first independent plant to win crude oil quotas since the introduction of new regulations allowing more private participation in a sector long dominated by state oil giants.
"With low crude oil prices, it's cheaper to process crude than straight-run fuel oil," the trader added.
Arbitrage volumes into Singapore are expected to drop 20 to 40 percent in July and August from June as freight rates remain high and the east-west spread is too narrow, traders said.
"There are nearly no fuel oil export tenders now," one of them said.
Azerbaijan's state-owned Heydar Aliyev refinery reopening after a month of planned maintenance and back at full capacity, could increase in fuel oil exports from there, traders said.
It exported 1.558 million tonnes of oil products last year, up from 1.046 million tonnes in 2013, as it began exporting fuel oil and vacuum gasoil.
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