Asia’s fuel oil markets were mixed on Monday as supply and demand fundamentals diverged, while very low sulphur fuel oil’s premium over a high-sulphur grade ticked up to a near one-month high.
The gradual emergence of December spot offers contributed to trading liquidity.
High sulphur fuel oil (HSFO) remained supported by expectations that an extension of OPEC+ output cuts would curb feedstock supply and production, while ample supply weighed on the low-sulphur market.
Very low sulphur fuel oil (VLSFO) arrivals into Singapore are expected to remain elevated for November following the high volumes recorded for October, particularly from some deep-sea regions such as Brazil, one trade source said.
If troubles persist at some regional gasoline produce units which use VLSFO as a feedstock, the market could remain under pressure, a second source said.
Cash premiums for 380-cst cargoes were firmer at around $14.7 a ton, reflecting deals in the market at higher premiums and also a steeper backwardation.
Likewise, on the 180-cst front, cash premiums closed the trading session higher, but deals were scant as buyers and sellers were in a stand-off over prices.
However, the Hi-5 spread – the price premium of 0.5% VLSFO to 380-cst HSFO – widened by $5 a ton from the previous trading session, recovering to a near one-month of high of $128.7 per ton.
Spot discussions for VLSFO cargoes on the window were equally minimal, but buying interest stayed firm at slightly higher premiums from the previous session, buoying cash premiums at $11.09 per ton.
In tenders, Malaysia’s Pengerang Refining offered around 570,000 barrels of hydrotreated atmospheric residue for Dec. 3-5 loading via a tender that closes Nov. 5 with same-day validity.
REFINERY
– Russia plans to take 1.8 million metric tons of refining capacity offline in November, an increase of 49% from an earlier plan, increasing the amount of crude oil available for export, Reuters calculations based on data from industry sources show.
OTHER NEWS
– OPEC+ has agreed to delay a planned December oil output increase by one month, the group said on Sunday, as weak demand notably from China and rising supply outside the group maintain downward pressure on the oil market.
– South Korean refiners reported on Monday sharp losses in the third quarter from oil refining, but expect their margins to recover in the fourth quarter with peak winter demand and refinery run cuts in Asia.
– Oil prices extended gains on Monday, rising more than $1 on a decision by OPEC+ to delay by a month plans to increase output, while the market braced for a week that spans a U.S. presidential election and a key meeting in China.
– Venezuela’s oil exports rose to a four-year high, approaching 950,000 barrels per day in October, boosted by growing crude output and more sales to India and the U.S., according to shipping data and documents from state firm PDVSA.
Source: Reuters (Reporting by Trixie Yap)