SINGAPORE: Asia’s front-month crack for 0.5% very low-sulphur fuel oil (VLSFO) rose on Monday to its strongest level in more then two years as traders expect tighter supplies in the coming weeks amid shrinking Western arbitrage flows into the region.

The front-month VLSFO crack jumped to $22.43 per barrel against Dubai crude during Asian trading hours, a level not seen since January 2020. The crack was at $20.61 per barrel on Friday.

The crack for the marine fuel grade has averaged $19.55 a barrel in February, about 25% higher compared with an average of $15.65 per barrel in January, Refinitiv data showed.

Cash differentials for Asia’s 0.5% VLSFO were at a premium of $17.78 a tonne to Singapore quotes on Monday, compared with $16.91 per tonne on Friday, wile the March/April VLSFO time spread widened it backwardation to trade at $24.25 a tonne on Monday.

Asia’s cash premiums for 380-cst high sulphur fuel oil (HSFO) were at 72 cents per tonne to Singapore quotes, compared with 65 cents per tonne at the end of last week.

The 380-cst HSFO barge crack for March traded at a discount of $16.51 a barrel to Brent on Monday, compared with minus $15.34 a barrel on Friday.

BP is abandoning its stake in Russian oil giant Rosneft in an abrupt and costly end to three decades of operating in the energy-rich country, marking the most significant move yet by a Western company in response to Moscow’s invasion of Ukraine.

Rosneft accounts for around half of BP’s oil and gas reserves and a third of its production and divesting the 19.75% stake will result in charges of up to $25 billion, the British company said, without saying how it plans to extricate itself.

PSO’s earlier tender to buy 50,000 tonnes of LSFO for March 16-31 delivery was awarded to BB Energy, trade sources said.

Oil prices jumped on Monday as Western allies imposed more sanctions on Russia and blocked some Russian banks from a global payments system, which could cause severe disruption to its oil exports.