Asia Fuel Oil: 380-cst HSFO cash premiums rise, VLSFO cracks strengthen

SINGAPORE: Asia’s cash premiums for 380-cst high-sulphur fuel oil (HSFO) rose on Thursday, lifted by active buying interests in the physical market, while residual fuel inventories in Singapore dropped to a three-week low.

The cash differentials for 380-cst HSFO were at a premium of 75 cents per tonne to Singapore quotes, compared with a 46-cent premium a day earlier.

The 380-cst HSFO barge crack for January traded at a discount of $12.86 a barrel to Brent on Thursday, compared with minus $12.75 a barrel on Wednesday.

Meanwhile, the front-month VLSFO crack surged to $19.44 per barrel against Dubai crude during Asian trading hours, the highest since February 2020. It was at $18.12 a barrel in the previous session.

Cash differential for Asia’s 0.5% VLSFO was at a premium of $13.96 a tonne to Singapore quotes on Thursday, 5 cents higher from Wednesday. Singapore’s onshore fuel oil stocks dropped 4%, or 929,000 barrels, to 22.2 million barrels, or 3.3 million tonnes, in the week to Feb. 9, according to the Enterprise Singapore data.

Weekly fuel oil inventories have averaged 22.3 million barrels so far this year, having averaged 22.5 million barrels a week in 2021, Reuters calculations showed. Onshore fuel oil inventories were 5.5% higher compared with year-ago levels.

Global supplies of diesel are dwindling as refiners struggle to keep pace with rapid post-pandemic demand recovery, exacerbating an acute global energy shortage which has already sent the prices of gas, coal and crude oil soaring.

At a time when global central banks are fretting over inflation rates not seen for decades, diesel shortages would push up fuel and transportation costs further and add more upward pressure on retail prices.