SINGAPORE: Asia’s front-month 180-cst high-sulphur fuel oil (HSFO) crack narrowed its discount to Dubai crude on Tuesday but was still near recent lows that were triggered by rising supplies and lower than expected utility demand.
Despite higher crude oil prices on Tuesday, the front-month 180-cst HSFO crack was at $7.31 a barrel below Dubai crude prices, up from minus $8.14 a barrel on Monday, Refinitiv data showed.
On Wednesday, the 180-cst HSFO crack discount was at its widest since March 2020 at minus $8.56 a barrel.
By contrast, the more actively traded 380-cst HSFO barge crack was virtually unchanged on Tuesday at $14.23 a barrel below Brent crude. The front-month crack sank to a near two-year low of minus $15.20 on Oct. 27, Refinitiv data showed.
High sulphur fuel oil cracks fell in October despite earlier expectations that the product would see increased demand to replace natural gas in power generation, the International Energy Agency (IEA) said on Tuesday.
“October is a shoulder month in power generation between summer cooling demand and winter heating in Asia and the Middle East, traditionally leading to lower demand from the sector,” the
IEA said.
“Outages at two major residue desulphurisation units in Korea and Kuwait also resulted in an increased availability of the product.”
Global oil markets remain very tight and heavily backward as demand returns to pre-pandemic levels, the chief executive officer of global trading firm Trafigura said on Tuesday.
Global crude benchmark Brent has recovered 60% since the start of the year, trading at above $80 a barrel, as nations ease COVID-19 restrictions and the global economy rebounds from the pandemic.
However, the IEA said on Tuesday said the oil market rally may ease off as the elevated
prices may help push up global production, particularly in the United States.
Meanwhile, OPEC Secretary General Mohammad Barkindo said on Tuesday that he expects an oil supply surplus as early as December and the market to remain oversupplied next year.
Trafigura bought a 20,000 tonne 0.5% very low-sulphur fuel oil (VLSFO) cargo from Trafigura at a $6 per tonne premium.
No HSFO cargo trades were reported in the Singapore trading window.
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