Asia Fuel Oil-Refining margins ease after sharp gains over past week

SINGAPORE: Fuel oil refining margins eased on Friday, slipping from a near 2-1/2 year high in the previous session.

Refining margins of the industrial fuel have been boosted by a mix of bullish supply and demand market fundamentals, as well as falling fuel oil inventories in Singapore and Amsterdam-Rotterdam-Antwerp (ARA).

REFINING MARGINS

- The July refining margin for FOB Rotterdam barge fuel oil to Brent crude on the Intercontinental Exchange (ICE) was trading at about minus $5.70 a barrel by 1800 Singapore time (1000 GMT).

- On Thursday, the ICE-traded July refining margin was trading as high as minus $5.45 a barrel after data showed ARA inventories of the fuel had sunk to an 8-month low.

- By comparison, the July refining margin traded on ICE at about minus $6.50 a barrel on June 1.

- 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.

ARA INVENTORIES

- Fuel oil stocks in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub fell by 27 percent to their lowest since mid-October after two very large crude carriers departed from ARA with full cargoes to Singapore, PJK's Patrick Kulsen said.

- ARA fuel oil inventories fell to 568,000 tonnes in the week to June 8, down from 778,000 tonnes in the previous week and 47 percent down from the same time last year.

- One VLCC left the ARA fuel hub on June 3 and another on June 7, both full with fuel oil cargoes heading to Singapore, PJK said.

- In 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.

WINDOW TRADES

- Four cargo trades were reported in the Platts window, totalling 20,000 tonnes of 180-cst fuel oil and another 80,000 tonnes of 380-cst fuel oil.