Asia’s high sulphur fuel oil (HSFO) market softened on Monday on expectations of softer demand from China ahead of a change to China tax rebate policy for fuel oil imports.
China is planning a tax revamp that would raise costs for imported fuel oil, prompting independent refiners to slow purchases, industry sources said.
Beijing is widely expected to roll out a change starting from October in the amount of consumption tax rebates refiners receive.
Fuel oil traders said they expect volumes to China to soften in the fourth quarter, with some buyers already on the sidelines ahead of the policy change.
Market backwardation for 380-cst HSFO narrowed on Monday to $11.75 a metric ton for the Oct/Nov contract, while cracks for October closed at discounts of about $7.50 a barrel.
Meanwhile, cracks for very low sulphur fuel oil (VLSFO) steadied on Monday after rallying in the previous trade session, though spot premiums inched higher on firmer trade and amid a backdrop of some lingering supply tightness, said sources.
Singapore October VLSFO/Dubai cracks closed at premiums above $14.40 a barrel on Monday, based on LSEG data. Meanwhile, cash premium for VLSFO was pegged above $18 a metric ton, after higher-priced trades emerged.
OTHER NEWS
– Oil prices rose on Monday after last week’s cut to U.S. interest rates and a dip in U.S. crude supply in the aftermath of Hurricane Francine countered weaker demand from top oil importer China.
– China’s Shandong Yulong Petrochemical on Friday began starting up one of two new 200,000 barrel per day (bpd) crude units in eastern China, sources said, marking the refinery’s official launch after four years of construction.
– India’s monthly oil imports from Russia fell by 18.3% to about 1.7 million barrels per day (bpd) in August from the previous month due to lower crude processing by some refiners, tanker data obtained from trade sources showed.
– Shell said that it would shut production at its Stones and Appomattox facilities in the Gulf of Mexico as a precautionary measure in response to a tropical disturbance.
WINDOW TRADES
– 180-cst HSFO: No trade
– 380-cst HSFO: No trade
– 0.5% VLSFO: Two trades
Source: Reuters (Reporting by Jeslyn Lerh; Editing by Vijay Kishore)