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380-cst time spread hits near 7-month high; S-Oil sells LSFO cargoes

Asia’s 380-cst high-sulphur fuel oil (HSFO) front-month time spread hit a near seven-month high on Wednesday as tightening arbitrage flows into the Singapore trading and storage hub squeezed the near-term supply outlook, trade sources said.

The tighter supply outlook has also been supported by expectations of rising seasonal demand in the Middle East as well as concerns of supply disruptions amid heightened geopolitical tensions there, sources said.

The July/August 380-cst time-spread widened its backwardated structure to $11 a tonne on Wednesday, up from $9.75 a tonne in the previous session and its highest since Nov. 29, Refinitiv Eikon data showed.

In the physical market, 380-cst HSFO cash premiums also hit a more than six-month high on Wednesday after rising 16 cents per tonne from the previous session to $5.03 per tonne to Singapore quotes.

ARBS

– Total fuel oil flows into East Asia for June are expected to be lower compared to the 6.02 million tonnes seen in May, with less than 5.5 million tonnes expected for the month, and 4.25 million tonnes notionally assessed so far, according to assessments by Refinitiv Oil Research released on Tuesday.

– The tight supply market for June, following three months of above-average inflows since the start of the year, comes amid record low Western arbitrage volumes to East Asia which are notionally assessed at 1.50 million tonnes, with about another 1.36 million tonnes assessed for July, the assessments showed.

TENDERS

– South Korea’s S-Oil sold two 40,000-43,000 tonne cargoes of low-sulphur fuel oil with a maximum 180-cst viscosity and a 0.4 percent sulphur content, each loading from Onsan over June 21-23 and June 29-July 1, to BP-Sinopec at a premium averaging about $130 per tonne to Singapore 180-cst quotes on an FOB basis.

– Kuwait’s KPC sold up to 80,000 tonne cargo of heavy 380-cst fuel oil with a maximum 4.2% sulphur content for June 27-28 loading to PetroChina at an unknown price level.

– India’s Reliance has offered up to 40,000 tonnes of carbon black feedstock (CBFS) with a maximum 1% sulphur content and a maximum 70-cst viscosity loading from Sikka over July 8-9 in a tender closing on June 20 with next day validity.

– For more information, please see [FUEL/TENDA].

KUWAIT

– Kuwait’s state refiner KNPC said on Wednesday that refining operations at its Mina Abdullah oil refinery have been affected by a cut in seawater supply, which is used to cool production units in the plant.

– KNPC said on its official Twitter feed that despite the temporary issue, its oil export operations have not been affected.

WINDOW TRADES

– Two HSFO cargo trades were reported in the Singapore trading window totalling 60,000 tonnes of 380-cst HSFO.

– P66 bought one 20,000 tonne cargo of the fuel to Gunvor at a $8 premium to the average of July Singapore quotes for delivery over July 4-8.

– P66 then sold a 40,000 tonne cargo to Shell at a $5 premium to spot Singapore quotes for delivery over the same laycan.

– No 0.5% low-sulphur fuel oil (LSFO) cargo trades were reported.

– Please click on [O/AS] for more details.

FUJAIRAH STOCKS

– Inventories for heavy distillates and residues in the Fujairah Oil Industry Zone (FOIZ) dropped 1.522 million barrels (about 227,000 tonnes) from the previous week to 10.213 million barrels (1.524 million tonnes) in the week ended June 17, data via S&P Global Platts showed. [FUJAIRAH/]

– Fujairah fuel oil inventories are now at an 11-week low.

– Compared with year-ago levels, however, the weekly fuel oil inventories at FOIZ were 15% higher.

– Fuel oil stocks at FOIZ have averaged 10.017 million barrels, or 1.495 million tonnes, so far in 2019, Reuters calculations showed. This compares with a weekly average of 7.9 million barrels, or 1.18 million tonnes, in 2018.

HEAVY CRUDES

– Heavy crudes have poured into the United States this spring, offsetting the loss of Venezuelan oil and producing a mini-surplus, with Canadian heavy crude this month being exported from the U.S. Gulf Coast.

– U.S. refiners have lined up larger supplies from Canada, Iraq and Colombia since Washington in January began choking off the flow of dollars to Venezuela’s socialist government by barring transactions with PDVSA, Venezuela’s state oil company and once among the top three providers of heavy crude to U.S. refiners. The United States went from importing 561,000 barrels per day (bpd) of Venezuelan oil in January to zero barrels in May.
Source: Reuters (Reporting by Roslan Khasawneh; Editing by Rashmi Aich)

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