SINGAPORE: Despite falling crude oil prices, Asia’s 0.5% very low-sulphur fuel oil (VLSFO) front-month crack slipped to a five-session low on Friday, but was slightly higher than the previous week.
The front-month VLSFO crack fell to $17.06 a barrel above Dubai crude on Friday, down from $17.87 a barrel in the previous session, but up from $16.23 in the previous week, Refinitiv Eikon data showed. On Jan 18, the VLSFO crack climbed to a near two-year high of $17.99 a barrel, Refinitiv data showed. Refiners globally are reaping the highest profits from gasoil production in years on stronger-than-expected demand and tight supplies despite concerns about the Omicron coronavirus variant’s impact on the world economy.
The tight gasoil supplies have translated into short VLSFO supply as refiners maximize middle distillate production and fewer blending components make their way into the VLSFO pool.
“Supply has been constrained by poor margins for simple refiners, meaning lower overall availability,” said Richard Gorry, managing director at JBC Energy Asia.
Meanwhile, residual fuel inventories at the Amsterdam-Rotterdam-Antwerp (ARA) and Fujairah storage hubs rose this week, while those in Singapore fell, the latest industry data showed. Fuel oil stocks in the ARA refining and storage rose by 68,000 tonnes, or 7%, to a two-week high of 1.1 million tonnes in the week ended Jan. 20, data from Dutch consultancy Insights Global (IG) showed.
Compared with last year, however, the inventories at the ARA hub were 20% lower and slightly below the five-year seasonal average of 1.18 million tonnes.
In the Fujairah, fuel oil stockpiles were 8% higher to a two-week high of 9.95 million barrels, or 1.57 million tonnes, despite higher exports from the hub.
In Singapore, fuel oil inventories fell 5% to a two-week low of 21.2 million barrels, or 3.34 million tonnes, as net imports shrank.