SINGAPORE: Asia’s front-month crack for 0.5% very low-sulphur fuel oil (VLSFO) rose on Wednesday to its highest level on record, while cash premiums for the marine fuel grade jumped on active buying interest in the physical market.
The front-month VLSFO crack climbed to $31.79 per barrel against Dubai crude during Asian trading hours, according to Refinitiv Eikon data that goes back to July, 2019. It was at $29.83 per barrel on Tuesday.
Cash premiums for Asia’s 0.5% VLSFO rose to $21.03 a tonne to Singapore quotes, compared with $19.80 per tonne a day earlier.
The March/April VLSFO time spread widened its backwardation by $1 on Wednesday to trade at $33 a tonne.
“Disruptions to fuel oil supplies from Russia, the world’s largest exporter of the product, strengthened an already-firm fuel oil market, particularly the LSFO market which is already steeply backwardated,” Refinitiv Oil Research analysts said in a weekly note.
“The overall strength in the fuel oil market is exacerbated by the broader bullishness in upstream crude oil markets,” the analysts added.
Asia’s cash premiums for 380-cst high sulphur fuel oil (HSFO) were at $8.01 per tonne to Singapore quotes on Monday, the highest since October last year. They were at a premium of $5.55 per tonne on Tuesday.
Beijing has told Chinese state refiners to consider suspending exports of gasoline and diesel in April as the Ukraine war sparks supply concerns, three sources with knowledge of the matter said on Wednesday. The pause, during a peak refinery maintenance season in Asia, could further tighten fuel supplies.
Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues rose 10.4% from the previous week to 10.8 million barrels (1.6 million tonnes) in the week ended March 7, data via S&P Global Platts showed. Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 41% higher.
The weekly fuel oil stocks at FOIZ have averaged 10 million barrels so far this year, compared with a weekly average of 10.3 million barrels in 2021, Reuters calculations showed.
Kuwait’s KPC was offering 80,000 tonnes of 380-cst heavy high-sulphur fuel oil (HSFO) for loading over March 12-13 in a tender closing on Wednesday with a same-day validity.
One 380-cst high-sulphur fuel oil (HSFO) deal, no 180-cst HSFO trades. One VLSFO trade was reported.
Asia’s liquefied natural gas (LNG) demand growth may cool this year as buyers baulk at record-high spot prices pushed even higher by Europe’s shift to the super-chilled fuel amid the Ukraine crisis, analysts and industry sources said.