Asia fuel oil: VSLFO crack, time spread firm; ample supply likely to cap gains

SINGAPORE: Asia’s 0.5% very low-sulphur fuel oil (VLSFO) refining margin and prompt month time spread firmed on Monday, after hitting multi-month lows in the previous week.

Monday’s gains, however, are expected to be limited by rising inventories in and around the Singapore hub amid higher arbitrage flows in March and April and limited incremental demand, trade sources said.

The prompt-month VLSFO crack was at $11.55 a barrel above Dubai crude prices on Monday, up from a near three-month low of $11.20 a barrel on Wednesday, data from Refinitiv Eikon showed.

Similarly, the prompt-month time spread rose to parity on Monday, up from a contango of minus 75 cents a tonne in the previous session - its lowest level since late-Deccember, the Refinitiv data showed.

Overall floating storage inventories in the Malacca Strait jumped 24% higher in the week to March 31, led by an increase in IMO-compliant VLSFO volumes, according to data intelligence firm Kpler.

Total floating storage inventories jumped by 665,000 tonnes to a two week high of 3.477 million tonnes, the data showed.

This came amid a 406,000 tonne rise of IMO-compliant VLSFO supplies from the previous week to 2.242 million tonnes, their highest since early-February, the Kpler data showed.

Stocks of HSFO climbed by 129,000 tonnes to a two-week high of 390,000 tonnes in the week to March 31. Stocks of residual fuels with unspecified sulphur contents also climbed by 130,000 tonnes from last week to 845,000 tonnes, the data showed.

Separately, Singapore residual fuel oil inventories hit a near four-month high in the week ended March 31 despite a jump in export volumes, official data showed on Thursday.

Onshore fuel oil stocks rose by 856,000 barrels, or about 135,000 tonnes, to 23.167 million barrels, or 3.648 million tonnes, Enterprise Singapore data showed.

This came despite higher export volumes which hit a five-month high of 515,000 tonnes in the week to March 31, led by exports to South Korea at 191,000 tonnes, the data showed.

Kuwait’s KPC offered two 24,000 to 25,000 tonne cargoes of 12-cst coker gasoil with a maximum 1.5% sulphur content for loading over April 18-19 and April 23-24 in a tender closing on April 5.