SINGAPORE: Asia’s 0.5 percent very low-sulphur fuel oil (VLSFO) market strengthened on Tuesday as tight finished-grade supplies steepened its near-term backwardation structure, trade sources said.
The prompt-month Jan/Feb VLSFO time spread jumped to a one-month high of $23 a tonne, while the Feb/March time spread climbed to a near two-week high of $18.25 a tonne, Refinitiv-Eikon data showed.
“There’s not enough finished ready 0.5 material available,” said Matt Stanley, Dubai-based oil broker at Starfuels.
“The main thing is that in December the arrivals to Singapore were mainly high sulphur, the lower sulphur fuels were snapped up by Japan and Korea so there is a general lack of blendstocks hence the higher backwardation,” Stanley added.
Trade sources said they expected the VLSFO market structure to ease towards the end of the first quarter of this year.
At the start of the year, the VLSFO market structure sold off, with the front-month time spread sinking to near two month lows, on profit taking and amid thin trade volumes, trade sources said.
Firming deal values and stronger buyer bids also helped lift VLSFO cash differentials to a near two-week high of $15.39 a tonne to Singapore quotes on Tuesday.
One VLSFO cargo trade was reported in the window totalling 20,000 tonnes. No high-sulphur fuel oil (HSFO) cargo trade was reported in the Singapore trading window.
Venezuelan state-run oil firm PDVSA this week will resume exports of diluted crude oil (DCO) for the first time in nine months, according to a document seen by Reuters.
Since US trade sanctions were imposed on PDVSA in 2019, a lack of diluents, especially heavy naphtha, has hurt its ability to produce exportable grades from its largest production region, the Orinoco Belt. Its extra heavy oil must be diluted with naphtha or condensate for transportation and exports.
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