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SINGAPORE: Asia’s 0.5percent very low-sulphur fuel oil (VLSFO) cash discount narrowed further on Tuesday, extending its recovery from a multi-month low hit late May as concerns of oversupply eased and demand prospects improved, trade sources said.

The cash discount narrowed to 59 cents a tonne to Singapore quotes, compared to 88 cents on Monday and a nine-month low of $3 a tonne marked on May 25.

Similarly, the prompt-month VLSFO contango structure narrowed to minus 50 cents a tonne, up from minus 75 cents in the previous session, Refinitiv data showed.

Mercuria sold 20,000 tonnes of 0.5percent VLSFO to BP at a 50 cent per tonne discount to Singapore quotes on an FOB basis.

No high-sulphur fuel oil (HSFO) cargo trades were reported.

Taiwan’s Formosa sold up to 40,000 tonnes of low-sulphur fuel oil with a maximum 1percent sulphur content and a maximum 180-cst viscosity loading from Mailiao over June 17-20 to Mitsui Energy Trading Singapore at an unknown price level.

Chinese authorities have ordered a unit of state-run PetroChina to stop trading off crude oil import quotas with local refineries as part of a crackdown on excessive fuel production, a move that could cut the country’s crude imports by 3 percent, sources said.

Without additional quotas from the company, crude purchases by the independent refineries, also known as teapots, will fall by 12 million to 16 million tonnes annually (240,000 to 320,000 barrels per day), or roughly 3percent of China’s total crude imports, the sources said, forcing the firms to import fuel oil instead to keep plants running.

PetroChina Fuel Oil, which produces and trades fuel oil and bitumen, was ordered in April to stop re-selling imported crude oil and trading off quotas to about half a dozen teapots, a legacy practice the firm has engaged in for years.