SINGAPORE: Refining margins for fuel oil hit a three-year high on Friday, buoyed by weaker crude prices, while cash premiums for the mainstay 380-centistoke high-sulphur fuel oil (HSFO) edged up as the prompt-month spread widened its backwardated structure.
The 380-cst barge crack for March rose to minus $3.10 a barrel over Brent crude during Asian trading hours, up from minus $3.33 a barrel on Thursday, Refinitiv data showed.
The margins for 380-cst fuel oil have risen about 36 percent this week in their biggest weekly gain since November 2018.
The Asian benchmark 180-cst fuel oil crack to Dubai crude widened to a fresh high in over two months and were at a premium of $1.52 a barrel, compared with $1.36 a barrel on Thursday.
Cash premiums for 380-cst high-sulphur fuel oil <FO380-SIN-DIF> inched up to $3.43 a barrel to Singapore quotes on Friday but were within close sight of a one-month low of $3.15 per barrel touched in the previous session as the prompt month spread widened by 50 cents to a premium of $5 per tonne.
UPCOMING DEMAND SHIFT
The implementation of new IMO sulphur regulations in 2020 will drive a large and sudden shift in demand away from high sulphur fuel oil (HSFO) and towards low sulphur fuel oil (LSFO) and marine gasoil (MGO), Fitch Solutions Macro Research said a note on Thursday.
The International Maritime Organization (IMO) will prohibit ships from using fuels with sulphur content above 0.5 percent from Jan. 1, 2020, compared with 3.5 percent currently, unless they are equipped with exhaust gas cleaning systems, known as scrubbers, to clean up sulphur emissions.
The short-term outlook remains broadly bullish for LSFO and MGO amid signs of global production and consumption patterns gradually drifting away from the fuel's heavier, more-pollutive grades ahead of IMO 2020, Fitch Solutions said.
"Supply will struggle to adapt, particularly in the early stages of the policy's implementation, leading to a spike up in MGO prices and a comparable slump in HSFO," analysts at Fitch Solutions said.
ARA INVENTORIES
Fuel oil stocks independently held in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub <STK-FO-ARA> rose 6.2 percent to about 1 million tonnes in the week to Feb. 7, data from Dutch consultancy PJK International showed.
Compared with year-ago levels, the fuel oil inventories in ARA were about 8 percent higher.
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