SINGAPORE: Cash premiums for cargoes of Asia's 180-cst high-sulphur fuel oil (HSFO) extended losses on Tuesday, falling away from a near eight-month high on Friday amid a weaker deal values and lower supplier offers. The cash premium fell to $9.89 a tonne to Singapore quotes, down from $13.44 a tonne on Monday and $20.48 a tonne on Friday, the highest since early January.
In the paper markets, however, bullish sentiment driven by a tightening supply outlook and sustained firm demand, particularly from utilities, helped nudge the prices higher. The front-month time spreads of both 180-cst HSFO and 380-cst HSFO were bid higher to near two-year highs of $16.50 per tonne and $14.50 per tonne, respectively, Refinitiv data showed.
The front-month 380-cst HSFO barge crack was also bid up to a near three-month high of $9.78 a barrel, the data showed. The return of a significant portion of Mexico's heavy sour crude oil production also helped ease some concerns over the shortfall in HSFO supplies, trade sources said. Mexican state oil firm Pemex said late on Monday that it has resumed 421,000 barrels per day in oil production and brought back online 125 wells following a deadly fire at an offshore platform on Aug. 22. PetroChina sold a 20,000 tonne 180-cst HSFO cargo in the Singapore trading window to Vitol at an $8 per tonne premium to Singapore quotes on an FOB basis. No 0.5% very low-sulphur fuel oil (VLSFO) cargo trades were reported. A total of 680,000 tonnes of fuel oil cargoes have traded in the window in August including 300,000 tonnes of VLSFO and 380,000 tonnes of HSFO.
Both the VLSFO and HSFO volumes were down by 17% compared to the July volume which totalled 820,000 tonnes. Trafigura and Vitol were the top buyers of HSFO cargoes in August at 180,000 tonnes each, while PetroChina and Glencore were tied for the top supplier spot with 160,000 tonnes each. The most active buyer of VLSFO cargoes was Shell with 140,000 tonnes, while Gunvor was the top seller with 200,000 tonnes.
China's demand for spot crude appears to be recovering after nearly five months of slower purchases caused by a shortage of import quotas, drawdowns from high inventories and COVID-19 lockdowns that muted Chinese fuel consumption.
Softer buying since April by the world's top crude importer and a drop in China's refining output to 14-month lows in July have depressed the prices of staple crude grades from West Africa and Brazil to multi-month lows. Ida, one of the most powerful hurricanes ever to hit the US Gulf Coast, knocked out power to over one million homes in Louisiana on Monday and prompted rescue operations in flooded communities around New Orleans as the weakening storm churned northward.
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