Residual fuel oil stocks at key trading hub Singapore retreated to three-week lows, official data showed on Thursday, amid a strongly backwardated market and high storage financing costs.

Onshore fuel oil stocks STKRS-SIN fell 11%to 20.47 million barrels (3.22 million metric tons) in the week to August 9, data from Enterprise Singapore showed. O/SING1

The lower inventories came despite higher net imports, which climbed 33% week-on-week at 784,000 tons.

The market structure for high sulphur fuel oil (HSFO) has recently firmed, with front-month backwardation widening to over 16-month highs recently, Refinitiv data showed. FO380SGSDMc0

A backwardated market typically discourages oil storage as current prices are trading at a premium to prices for future deliveries.

Meanwhile, the United Arab Emirates was the top origin for Singapore’s fuel oil imports in the week to August 9, with import volumes more than tripling to about 251,000 tons.

The attractive high-sulphur market continues to provide a draw for Middle Eastern barrels to Asia, while recently firm prices attract more selling interest.

Separately, imports from Brazil to Singapore also climbed, with volumes firming by 24% to 153,000 tons in the week.

Bangladesh was the top destination for fuel oil exports out of Singapore, with net export volumes at 61,000 tons.
Source: Reuters (Reporting by Jeslyn Lerh; Editing by Varun H K)