SINGAPORE: Asia’s front-month high-sulphur fuel oil (HSFO) viscosity spread, the price differential between 180-cst HSFO and 380-cst HSFO, hit a record high on Monday.

This follows a spike in gas prices which prompted utilities across Asia and the Middle East to increase consumption of HSFO, particularly the lower viscosity grade which is already in tight supply, beyond the usual peak summer months.

The front-month viscosity spread climbed to a record $25.25 per tonne on Monday, up from $20.50 in the previous session and the highest since records began in 2013, according to Refinitiv data in Eikon.

“The tightness in global gas supplies creates a clear and potentially meaningful bullish catalyst for the oil market this winter, larger than the downside risk to global oil demand from another Delta-like COVID wave,” Goldman Sachs analysts said in a note to clients on Sunday.

“The bullish impact of even moderate gas-to-oil substitution in power would be greater for the fuel oil and LPG markets relative to distillates given their smaller market size,” said the Goldman analysts.

“As a result, we recommend entering a long 1Q22 Singapore fuel oil position to best capture the potential for oil to come the gas rescue this winter.”

Other analysts, however, see a more limited upside.

“We see only limited evidence that (fuel switching) is occurring, coming mainly from marginal consumers in Pakistan and Bangladesh that only recently moved from oil-fired to gas-fired power plants,” said JBC Energy in a note on Monday.

“The same cannot be said for major consumers yet: players in Europe have ramped up coal purchases, while Korea and Japan too have diversified their fuel mix for the winter,” said JBC.

“While additional oil demand on the back of a power crunch cannot be ruled out at this point, we are sceptical that oil demand will receive an outsized boost.”

Two HSFO cargo trades were reported in the window totalling 40,000 tonnes. No 0.5% very low-sulphur fuel oil (VLSFO) cargo trades were reported.