SINGAPORE: Asia’s refining margin for very low sulphur fuel oil (VLSFO) fell to a six-month low this week, as signs of supply tightness letting up and softening gasoil margins weighed on sentiment.
The front-month 0.5% LSFO/Dubai crack was lower at $15.06 per barrel at the Asia close (0830 GMT) on Friday, Refinitiv data showed. The crack has softened sharply versus a record high of $42.10 per barrel seen on June 30.
The decline largely mirrored the trend of softening gasoil margins, as distillates are a common blending component for the VLSFO supply pool.
Meanwhile, traders have said that arbitrage economics have become more viable amid a softer backwardation in the VLSFO market.
More arbitrage supplies are expected to arrive at the trading hub of Singapore into August, either from the West or regionally from other Asian exporters.
Reflecting weaker sentiment, the 0.5% VLSFO cash differential fell $4.90 to a premium of $64.71 per tonne over Singapore quotes on Friday, extending declines for a third straight session.
India’s Nayara Energy sold 40,000 tonnes of 0.5% low sulphur fuel oil to Shell for end-July loading. The cargo is scheduled to load out of Vadinar between July 29-31, according to market sources.
Fuel oil inventories in the ARA refining and storage hub rebounded 4% to 1.16 million tonnes in the week ended July 21, after sliding for four consecutive weeks, latest data from Dutch consultancy Insights Global showed.
Oil prices climbed in Asia trading on Friday, rebounding from previous declines amid supply tightness and geopolitical tensions, even though weakened demand in the United States has cast a shadow on the market this week.
South Korean contract workers have tentatively agreed to end their strike at the country’s No.3 shipbuilder in return for a much smaller wage hike than they had demanded, union officials and subcontractors said on Friday.
Cyprus has already overcome the loss of Russian maritime trade due to European sanctions, and the Mediterranean shipping hub is chasing business expansion in Japan and elsewhere in Asia as it looks to grow its flag, a senior government official said.
An agreement on a bailout for German utility Uniper is in sight, with the state set to take a stake in the company, German government and parliamentary sources said on Thursday.
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