VLSFO cash premiums gain, HSFO cash premiums hit multi-month highs

SINGAPORE: Asia’s cash premiums for 0.5% very low-sulphur fuel oil (VLSFO) rose for a second consecutive session on Tuesday, while the prompt-month spread for the marine fuel grade remained in steep backwardation.

Cash differentials for Asia’s 0.5% VLSFO, which have surged about 44% in the last month, were at a premium of $19.80 a tonne to Singapore quotes, compared with $19.67 per tonne a day earlier.

The March/April VLSFO time spread traded at $32 a tonne on Tuesday, compared with $33.75 a tonne on Monday.

The front-month VLSFO crack rose to $29.83 per barrel against Dubai crude during Asian trading hours, up from $29.61 per barrel in the previous session.

Meanwhile, the 380-cst HSFO barge crack for April traded at a discount of $16.79 barrel to Brent on Tuesday, while cash premiums for 380-cst high sulphur fuel oil (HSFO) rose to a more than four-month high of $5.55 per tonne to Singapore quotes.

Backed by firmer deals in the physical market, the cash differentials for 180-cst HSFO surged to a premium of $8.59 a tonne to Singapore quotes, a level not seen since October last year. They were at a premium of $6.39 per tonne a day earlier.

Some Asian refineries plan to increase output in May to cash in on high prices for gasoil exports to Europe, even as the steepest crude prices in 14 years threaten profit margins, numerous trade sources said.

European diesel supplies have shrunk following the disruption of western sanctions imposed on Russia in response to its invasion of Ukraine, which it describes as a “special operation”.

Strong European demand has boosted Asian refiners’ profits for producing gasoil for exports to the West. However, the refiners are also paying record premiums for Middle East crude supplies after the disruption of sanctions left buyers with limited options.

One 380-cst high-sulphur fuel oil (HSFO) deal, two 180-cst HSFO trades.

One VLSFO trade was reported. The United States is willing to move ahead with a ban on Russian oil imports without the participation of allies in Europe, two people familiar with the matter told Reuters, in light of Russia’s invasion of Ukraine.

Oil prices rose on Tuesday, with Brent surging past $126 a barrel, as fears of formal sanctions against Russian oil and fuel exports spurred concerns about supply availability.