HSFO margins recover to nine-month highs

Refining margins for high sulphur fuel oil (HSFO) rose to nine-month highs as of Tuesday, supported by expectations of potentially less exports from Russia, as well as firmer seasonal demand for power generation.

The front-month 380-cst HSFO crack climbed to a discount of $12.82 a barrel at the Asia close (0830 GMT).

Russia is expected to lower exports of HSFO as refinery maintenances reduce supplies, while the Middle East is expected to send out less HSFO in the coming months as domestic demand for power generation firms.

High-sulphur vacuum gasoil supplies to the market are also likely to drop amid the ramp-up of Saudi Aramco’s Jizan refinery.

On the demand front, South Asia is expected to seek more HSFO purchases as demand gears up in summer, in turn lending some support to the HSFO market in the second quarter.

In contrast, Asia’s very low sulphur fuel oil (VLSFO) eased further on Tuesday, as ample supplies and tepid bunkering demand continued to weigh on the market.

Singapore’s spot 0.5% VLSFO cash premium dipped for a second straight session to $7.61 a tonne, while the market’s front-month crack rebounded slightly from the previous session to $8.95 a barrel at the Asia close (0830 GMT).

Ample supplies continued to cap market backwardation levels, with nearly 6 million tonnes of fuel oil headed for Asia this month, while more than 3 million tonnes are already estimated to load for April, ship-tracking data from Refinitiv showed this week.

OTHER NEWS

– Oil prices moved in a narrow range on Tuesday as the oil markets weighed developments in the banking crisis, along with supply concerns and indications of strengthening demand.

– Pirates on Saturday attacked and boarded a Danish-owned ship in the Gulf of Guinea, shipping company Monjasa said on Tuesday.

– The Spanish government has tightened its rules around ship-to-ship oil transfers after an uptick in the activity along its coastline.

– BP and Abu Dhabi’s state oil giant on Tuesday offered to acquire 50% of Israeli offshore natural gas producer NewMed Energy for around $2 billion, making their entry into Israel’s growing energy sector.

WINDOW TRADES

– 180-cst HSFO: No trade
– 380-cst HSFO: Two trades
– 0.5% VLSFO: No trade
Source: Reuters