SINGAPORE: Asia’s cash premium for very low sulphur fuel oil (VLSFO) has tumbled more than 90% compared to the start of the month as the market became awash with supply.

The 0.5% VLSFO cash premium fell $2.02 to a premium of $3.97 per tonne on Wednesday, sliding for ten consecutive sessions. The premium was at $46.83 at the start of August.

Higher regional exports, steady arbitrage supplies and increasing production from China had weighed on the VLSFO market since mid-July, pulling the market down sharply.

Downstream bunker fuel premiums have also come under pressure, with some bunker traders saying premiums have now fallen back to levels last seen in the first quarter, following a rally in the second quarter.

The front-month VLSFO/Dubai refining crack has also weakened, averaging $25.50 per barrel in August, versus $15.15 per barrel in July.

The high sulphur fuel oil has also softened in recent trading sessions, with the 380-cst HSFO cash premium sliding back into single digits over Singapore quotes towards the end of August.

Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues rebounded 11% from the previous week to 11.68 million barrels (1.84 million tonnes) in the week ended Aug. 29, latest data from S&P Global Commodity Insights showed.