Asia Fuel Oil: 380-cst HSFO cash premiums hit a near 6-month high

SINGAPORE: Asia’s cash premiums for 380-cst high-sulphur fuel oil (HSFO) surged to their highest level in nearly six months on Wednesday, lifted by steady cargo demand in the Singapore trade window, while residual fuel inventories in Fujairah dropped to a three-week low.

The cash differentials for 380-cst HSFO were at a premium of $9.21 per tonne to Singapore quotes, a level not seen since late-September last year. They were at a premium of $7.18 per tonne a day earlier.

“We expect some bullish impact on HSFO markets in the near to medium term, as Europe is also expected to source replacement straight-run cargoes as feedstock from the Middle East, in turn competing with Asian refiners who are also increasing their appetite for these barrels,” Refinitiv Oil Research analysts said in a weekly note.

“There are also signs of returning South Asian utility demand, with Pakistan entering its summer season from April onwards.” The 380-cst HSFO barge crack for April traded at a discount of $15.02 a barrel to Brent on Wednesday, compared with minus $15.61 a barrel on Tuesday.

Meanwhile, the front-month VLSFO crack rose to $24.79 per barrel against

Dubai crude during Asian trading hours, 60 cents higher from the previous session.

Cash premiums for Asia’s 0.5% VLSFO fell for a second straight session to $24.44 a tonne to Singapore quotes on Wednesday, marginally drifting away from a more than two-year high of $24.75 per barrel touched on Monday.

Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues dropped 6.2% from the previous week to 10.1 million barrels (1.5 million tonnes) in the week ended March 21, data via S&P Global Platts showed.

Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 42% higher.

The weekly fuel oil stocks at FOIZ have averaged 10.1 million barrels so far this year, compared with a weekly average of 10.3 million barrels in 2021, Reuters calculations showed.

One 380-cst high-sulphur fuel oil (HSFO) deal, no 180-cst HSFO trades.

Oil prices rose in volatile trading on Wednesday, supported by disruption of Russian and Kazakh crude exports via the CPC pipeline.

Energy and commodity markets are in shock after Russia’s invasion of Ukraine, the world’s top trading firms said on Tuesday, warning of gas and diesel shortages in Europe and economic recession if Russian flows fall further.