0.5%S marine fuel East-West spread hits all-time high on stronger Asian prices

The spread between Singapore marine fuel 0.5%S cargo and Rotterdam marine fuel 0.5%S barge assessments hit an all-time high of $108/mt on June 30, according to Platts assessments by S&P Global Commodity Insights, due to a stronger Asian market.

The previous all-time high for the East-West spread was on May 31, when it reached $106/mt. S&P Global started assessing marine fuel 0.5%S East-West on April 4.

Singapore marine fuel 0.5%S prices are typically higher than Rotterdam, allowing cargoes to move from the West to the East. The East-West spread is an indicator that shows the viability of arbitrage trades while higher East-West spreads do not necessarily mean active arbitrage trades because of other elements such as freight rates and backwardation.

The Singapore marine fuel 0.5%S market has been strong amid supply tightness. There were not enough cutter stocks as the stocks were taken by the gasoil market, which has higher values, market sources said. Even though the Singapore gasoil crack spread has plunged in the last several days, cutter stocks were still going to the gasoil market as gasoil values were still higher than marine fuel oil, the sources said.

The Singapore July swaps 10 ppm gasoil crack spread vs. Dubai crude was $51.71/b on June 30, the lowest since June 9, when it was $51.68/b, S&P Global data showed. But the gasoil crack spread remained higher than that of marine fuel 0.5%S, which came in at $42.52/b, the highest since the launch of the assessment in May 2019.

The Singapore marine fuel 0.5%S market also saw an all-time high in the front-end time spread on June 30. The July-August spread rose to $83/mt on June 30, up $11.75/mt day on day, S&P Global data showed. The previous record high was $73.75/mt on May 30, according to the data.

Meanwhile, a higher East-West spread does not mean the European low sulfur fuel oil market is weak.

The European marine fuel 0.5%S market remained tight as refiners have been using a sweeter crude diet lately to maximize production of products like gasoline, sources said.

European refining margins remain strong as rising demand for refined products has converged with low inventories, expanded regional turnarounds and less expensive natural gas.

“Refining margins in Europe are very strong amid robust gasoline and distillate cracks, the ongoing recovery of refined product demand, combined with expectations for a drop in Russian imports and low inventories in Europe, [which] continue to boost cracks to record levels, with refining margins also reflecting the strong fundamentals,” according to Platts Analytics.
Source: Platts