SINGAPORE: The very low sulphur fuel oil (VLSFO) market firmed on Monday as an outlook for tight supply persisted, with the cash differential hitting a new record high.

The 0.5% VLSFO cash premium rose $3.73 from the previous session to $79.40 a tonne over Singapore quotes, breaching its previous all-time high of $79.23 a tonne on June 2, based on Reuters data.

A shortage of gasoil blending components kept fuel oil supplies tight since June, traders said. While arbitrage fuel oil inflows from the West are expected steady in July, some of these inflows are not finished products and have to be further blended.

Meanwhile, the high sulphur fuel oil (HSFO) market held steadily in discounts. Supply replenishment is expected steady for July, while downstream bunker demand showed little uptick. The 180-CST HSFO differential widened to a discount of $2.65 a tonne on Monday, versus a discount of $1.73 on Friday. The 380-CST HSFO differential was at a discount of $2.08 a tonne, also edging lower from the previous session, where it was at a discount of $1.66.

Oil prices reversed losses and edged up on Monday as concerns of tight supply amid lower OPEC output, unrest in Libya and sanctions on Russia outweighed fears of a global recession. India will only withdraw its windfall tax introduced last week for oil producers and refiners if global prices of crude fall as much as $40 a barrel from present levels, Revenue Secretary Tarun Bajaj told Reuters on Monday.

Sri Lanka is struggling to raise $587 million to pay for about half a dozen fuel shipments, a top minister said on Sunday as the cash-strapped country tries to cope with its worst financial crisis in decades.