Asia Fuel Oil: VLSFO crack firms, Fujairah stocks fall

SINGAPORE: Asia’s front-month 0.5% very low-sulphur fuel oil (VLSFO) refining margin firmed on Wednesday, climbing to a more than one-month high of $13.76 a barrel above Dubai crude, despite rising crude prices.

The VLSFO cash premium also firmed to a one-month high of $1.25 a tonne to Singapore quotes as deal activity in the Singapore trading window resumed.

The VLSFO market has been supported this week by expectations that arbitrage volumes will recede in the near term following strong inflows in March and April, trade sources said.

However, the firming crack values may cap gains as refiners are incentivised to maintain higher output of the fuel amid firm profit margins, the sources said.

Meanwhile, fuel oil inventories in the Fujairah bunkering and storage hub dropped 11% to a two-week low in the week ended April 12, data released on Wednesday showed. The lower inventories came as export volumes to regional and Asian markets firmed, trade sources said.

Bunkering demand in the Fujairah hub, however, was lacking over the past week, the sources said. While the inventories were lower, supplies were seen as plentiful, said one Dubai-based oil trader.

“Fujairah has more than required bunker stock now being good number of arbitrage cargoes arrived here plus Uniper is back so no shortage expected,” said the trader.

Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 1.217 million barrels, or about 192,000 tonnes, to 9.994 million barrels, or 1.574 million tonnes, data via S&P Global Platts showed.

Fujairah’s fuel oil inventories were 34% lower than year-ago levels.

According to assessments by Refinitiv Oil Research, exports from the UAE jumped to 396,000 tonnes in the week ended April 11, up by 197,000 tonnes from the prior week.

“Outbound flows remain strong, contributing to a drop in inventories,” Refinitiv Oil Research said in a note on Wednesday.

Two VLSFO cargo trades were reported in the window totalling 40,000 tonnes along with two 380-cst high-sulphur fuel oil (HSFO) cargo trades totalling 40,000 tonnes.

The VLSFO deals marked the first VLSFO cargo trades since March 17.

Thailand’s PTTGC sold a 35,000-tonne cargo of 0.5% VLSFO loading from Map Ta Phut between April 29-May 1 to an unknown buyer at a discount of about $1 per tonne to benchmark Singapore 0.5% marine fuel oil quotes on an FOB basis.