ASIA RESIDUAL FUELS: Key market indicators for July 4-8
Singapore marine fuel oil 0.5%S supply was not expected to increase greatly over July 4-8 even though the Singapore 10 ppm gasoil crack spread has narrowed, as the crack spread for gasoil remains higher than for marine fuel 0.5%S, maintaining the flow of cutter stocks into the gasoil market, market sources said.
In contrast, high sulfur fuel oil supply was expected to remain ample due to increasing cargo inflows to Asia, the sources said.
Crude oil futures kicked off the week higher in mid-morning trade in Asia July 4, with September ICE Brent at $111.27/b at 11 am Singapore time (0300 GMT), up from $109.47/b at the 0830 GMT Asian market close July 1.
Marine fuel 0.5%S
** The cash differential for Singapore marine fuel 0.5%S cargoes against Mean of Platts Singapore swap values declined to $75.75/mt July 1 from an all-time high of $78.58/mt June 27, S&P Global Commodity Insights data showed, while traders said supply tightness was expected to continue supporting the market.
** Market sources said there was not enough marine fuel oil in the market to meet demand amid higher gasoil values, with blending components being taken by the gasoil market and little left for the marine fuel 0.5%S grade. The Singapore gasoil crack spread to Dubai crude narrowed to $54.95/b July 1 from an all-time high of $71.72/b on June 24, but was still much higher than the crack spread for marine fuel 0.5%S at $32.28/b, S&P Global data showed.
** In the downstream bunker market, demand in Singapore also shows no sign of abating amid underlying supply tightness and steady demand.
** While the Singapore bunker price was $15/mt higher than at Zhoushan after flipping to premium on June 22, high freight rates have given owners the option of bypassing the Chinese port, where bunker is cheaper, when voyage optimization is key.
** Balance July ex-wharf term contracts were heard settled at $90/mt over June 27-July 1, up from the mid-$80s/mt the week before. However, a dearth of supply and high prices have seen contracted volumes shrink as suppliers adopt a cautious approach.
** Marine fuel 0.5%S supply in the Middle Eastern port of Fujairah has eased slightly after the resumption of the operations at the Uniper refinery, with lead time heard as short as seven days for some suppliers, though the majority are still offering 10 days forward.
** Chinese traders expect the state-owned oil majors to offer more competitively in Zhoushan’s delivered marine fuel 0.5%S bunker market amid the increasing availability of domestically produced cargoes, though other suppliers reported less-than-ample stocks for prompt early-July bunker deliveries.
** Bunker suppliers in Hong Kong are likely to see higher demand for balance-July term contractual ex-wharf marine fuel 0.5%S parcels amid expectations of rising inventories, as the limited stockpiles lifted July’s term ex-wharf marine fuel 0.5%S bunker premiums and also dented demand for the delivered grade, sources said.
** A marine fuel 0.5%S stock build was prompting most South Korean refiners to offer more competitively in the downstream delivered market, while robust bunker demand was expected to continue, with suppliers reportedly having largely sold of early-July deliveries, traders said.
High sulfur fuel oil
** Supply in Singapore’s high sulfur bunker fuel market was likely to remain ample July 4-8 due to increasing supply into Asia, sources said.
** Fujairah has emerged as a key importer of Russian fuel oil in recent months, with fuel loadings from Russia to Fujairah reaching a record high of 527,000 mt (116,00 b/d) in June, according to preliminary estimates from data intelligence firm Kpler, up from 403,00 mt in May and 482,000 mt in April.
** HSFO bunker demand in Singapore remains tepid with few inquiries reported, and delivered HSFO prices are likely to remain capped by ample availability.
** HSFO bunker demand in South Korea for early-July deliveries was expected to strengthen from the same period in June, while barge availabilities remain healthy, traders said.
** Premiums for Japan-delivered 380 CST HSFO bunkers are likely to remain capped amid ample stocks, despite an uptick in demand for both spot and term contractual nominations since July, according to local bunker suppliers.
** Hong Kong’s HSFO demand is likely to remain steady for early-July bunker deliveries, while local suppliers expect ample supply to weigh on delivered bunker premiums, market sources said.