Asia’s hi-5 fuel oil spread crunched back to its narrowest in more than four years this week, data showed on Friday, as high sulphur fuel oil (HSFO) held onto its strength in recent sessions while very-low sulphur fuel oil (VLSFO) remained weak.
The hi-5, which captures the premium of VLSFO over 380-HSFO, fell below $70 a metric ton for the March contract on Friday, LSEG data showed. The spread was last narrower in November 2020. (FO05-380SGMc1)
The HSFO market has retained support, with backwardation going strong at the prompt trading months, trade sources said.
A firmer bid for spot 380-cst cargo also emerged on Friday, lifting benchmark cash differentials following several days of rangebound premiums. (FO380-SIN-DIF)
Cracks for 380-cst HSFO closed at premiums to Brent quotes (FO380BRTCKMc1) by the end of the week, while holding in narrow discounts to Dubai quotes (FO380BRTCKMc1).
In contrast, the VLSFO market has weakened due to bearish bunker demand in February so far.
Delivered-basis bunker premiums have dropped below $10 per ton this week, even dipping below ex-wharf premiums for some trades and crimping margins for sellers, trade sources said.
Meanwhile, cracks for VLSFO (LFO05SGBRTCMc1) slipped below premiums of $11 per barrel on Friday.
As for tenders, South Korea’s S-Oil offered two cargoes of slurry and one cargo of light cycle oil for March.
INVENTORY DATA
– ARA fuel oil inventories (STK-FO-ARA) fell 5.4% to 1.32 million tons in the week to Feb. 20, based on data from Dutch consultancy Insights Global.
OTHER NEWS
– Oil fell on Friday but were still poised for a weekly rise on concerns over supply disruptions in Russia and an improving outlook for demand in the United States and China.
– Russia has extended its gasoline export ban, with exemptions for producers, for six months, the country’s government said on Thursday.
– Marine fuel supplier Chimbusco Pan Nation said on Friday that it has delivered its largest marine biofuel stem in Hong Kong to date, also marking the biggest volume recorded in a single delivery at Chinese ports.
– The European Union will seek more gas from countries including the U.S. to replace Russian supplies, and expand renewable energy faster to cut its overall reliance on the fuel, the EU’s energy commissioner has said.
WINDOW TRADES
– 180-cst HSFO: No trade
– 380-cst HSFO: No trade
– 0.5% VLSFO: No trade
Source: Reuters