Asia Fuel Oil: Low-sulphur bunker premiums retreat on volatile crude

08 Jul, 2022

SINGAPORE: Spot bunker fuel premiums for very low sulphur fuel oil (VLSFO) retreated in Singapore on Thursday as buying sentiment swayed amid volatility in crude prices, which have swung between about $2 per barrel in losses and gains of nearly $1 per barrel within the day.

Bunker premiums on a delivered basis were largely in the range of $90-$105 per tonne to Singapore quotes, depending on delivery dates, bunker traders said on Thursday.

This compares steady-to-lower with the previous week, when premiums were mostly still hovering above $100 per tonne, especially for prompt delivery dates.

The 0.5% VLSFO cash differential also retreated in recent trading sessions after touching record highs. It fell to a premium of $69.27 per tonne to Singapore quotes on Thursday, versus $74.62 per tonne the day before.

Nonetheless, tight supply of blending components is expected to cap declines in premiums for at least the first half of July, market sources said. VLSFO cracks have continued to lag behind gasoil cracks, Refinitiv data showed. This has incentivised refiners to produce more middle distillates, at the expense of fuel oil blending components.

Indonesia’s Pertarmina issued a tender offering 200,000 barrels of decant oil for loading out of Cilacap from August 3-4. The tender is valid from July 5-7.

Taiwan’s Formosa was offering 35,000 tonnes of 180-cst low sulphur fuel oil with maximum 0.5% sulphur, for loading out of Mailiao from July 30-31. The tender closes on July 7 with same-day validity. Singapore fuel oil inventories rose 3% to a four-week high of 21.408 million barrels in the week to July 6, latest data from Enterprise Singapore showed.

China issued a third round of petroleum-product export quotas this week, covering 5 million tonnes of refined fuel and 2.5 million tonnes of low-sulphur fuel oil (LSFO).

The quotas, issued earlier than expected, will bring this year’s total refined fuel export quotas to 22.5 million tonnes, 39% less than the first three allotments last year, and total LSFO to 12.25 million tonnes, up 11%.

The table below lists the details of the new batch of 2022 fuel export quotas, with volume in million tonnes. CNPC, Sinopec, Sinochem and ZPC received LSFO quotas.

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