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SINGAPORE: Asia’s front-month 0.5% very low-sulphur fuel oil (VLSFO) crack extended gains on Wednesday, inching higher despite rising crude oil prices on a tighter near-term supply outlook.

The front-month VLSFO crack was 8 cents higher to a one-month high $12.47 a tonne above Dubai crude, Refinitiv data showed.

In the high-sulphur fuel oil market, prices for 180-cst HSFO were lower with cash premiums and front-month time spreads continuing their decline from the multi-month highs hit recently.

However, tight supplies and firm demand from utilities expected to keep HSFO market well supported into the fourth quarter, beyond the peak seasonal demand in the summer, trade sources said.

Fuel oil inventories in the Fujairah bunkering and storage hub dropped 5% to a five-month low in the week ended Aug. 30, data released on Wednesday showed.

The lower inventories, which marked three straight weeks of declines, came amid steady bunkering demand but despite lower weekly export volumes, according to analysts and trade sources.

Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 442,000 barrels, or about 70,000 tonnes, to 8.25 million barrels, or 1.3 million tonnes, data via S&P Global Platts showed.

Fujairah’s fuel oil inventories were 38% lower than year-ago levels. According to assessments by Refinitiv Oil Research, exports from the UAE fell to 232,000 tonnes in the week ended Aug. 29, down by 35% from the 2021 weekly average of 356,000 tonnes. “The drop in loading volumes combined with a spike in imports means that we anticipate a much-needed inventory build for the week,” according to Refinitiv Oil Research.

Pakistan has stepped up its oil and gas imports this year from last year as demand from its power sector increases amid more economic activities as coronavirus-induced restrictions are lifted, industry sources said.

So far in 2021 through September, the South Asian country has imported at least 785,000 tonnes of fuel oil through tenders, up 52% from what it imported all of last year, according to data from tender documents and traders. Its overall LNG imports rose by 23% to about 5.3 million tonnes though August this year, compared with the same period last year, Refinitiv Eikon shiptracking data showed.

But with spot and forward LNG prices currently above those for fuel oil, industry sources said they expect Pakistan’s fuel oil imports to hold firm over the near term.

Three 180-cst high-sulphur fuel oil (HSFO) cargo trades were reported in the window totalling 60,000 tonnes.

Vitol bought all three HSFO cargoes, lifting two from Glencore and one from PetroChina. Trafigura sold a 20,000-tonne 0.5% very low-sulphur fuel oil (VLSFO) cargo to Mercuria. S&P Global Platts has started reflecting approved floating storage units (FSU) as additional delivery points in its ex-wharf Singapore bunker assessments for 380-cst HSFO and VLSFO from Sept. 1, the price reporting agency said in a note on Wednesday.

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