SINGAPORE: Asia’s 0.5% very low-sulphur fuel oil (VLSFO) front-month crack extended declines on Wednesday to a more than one-week low on ample near-term supplies as arbitrage volumes in June are expected to hold firm, trade sources said.
Fuel oil flows into East Asia were assessed at 5 to 5.5 million tonnes in June, steady-to-higher from the 5.15 million tonnes in May and firmly higher from the 2020 monthly average of 4.82 million tonnes, assessments by Refinitiv Oil Research on Wednesday showed.
The refining margin also weakened as crude oil prices continued to rally on signs of strong fuel demand in western economies, while the prospect of Iranian supplies returning faded.
The July VLSFO crack fell to its lowest level this month at $11.81 a barrel above Dubai crude, down from $12.19 in the previous session.
Fuel oil inventories in the Fujairah bunkering and storage hub dropped 5% to a two-week low in the week ended June 7, data released on Wednesday showed.
The lower inventories came amid higher export volumes and rising regional utility demand, trade sources said.
Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 777,000 barrels, or about 122,000 tonnes, to 13.87 million barrels, or 2.18 million tonnes, data via S&P Global Platts showed. Compared to last year, the Fujairah fuel oil inventories were 19% lower.
According to assessments by Refinitiv Oil Research, exports from the UAE jumped to 330,000 tonnes in the week ended June 6, up by 200,000 tonnes from the prior week and on par with the 2021 weekly average of 334,000 tonnes.
The UAE exports were supported by fresh shipments of straight run fuel oil (SRFO) from ADNOC’s Ruwais refinery after its residual fluid catalytic cracker was taken offline last week due to a leak, according to Refinitiv Oil Research.
ADNOC sold at least three 80,000-tonne cargoes of SRFO, some via ship-to-ship transfer offshore Fujairah, to buyers including Vitol, Chevron and PetroChina, trade sources and shiptracking data in Refinitiv Eikon showed. No VLSFO or high-sulphur fuel oil (HSFO) cargo trades were reported in the Singapore trading window.