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Singapore 380 CST cash differential hit a three-year high on tight supply

Singapore 380 CST high sulfur fuel oil cash differential rose to a premium of $4.94/mt at the Asian close Friday, a three-year high amid tight supply stemming from low arbitrage inflow, S&P Global Platts data showed.

The last time the cash differential was higher was on June 22, 2015, at a premium of $5.43/mt, the data showed. The differential jumped $1.62/mt from Thursday.

Singapore 380 CST HSFO was assessed at $431.38/mt Friday, up $5/mt day on day, Platts data showed.

At the same time, the Singapore 380 CST July/August spread was assessed at $6/mt Friday, the highest since May 29, 2015, when it was assessed at $13.25/mt, Platts data showed.

The market is “still reflecting the low stocks and low arbitrage volume,” a trader based in Singapore said.

Singapore’s commercial stocks of residues fell 4.6% week on week to 19.188 million barrels in the week ended June 20, IE Singapore data showed. The stocks were last lower than that on May 23, when it was at 18.341 million barrels of stocks, the data showed.

The arbitrage inflow of HSFO to Singapore from Europe and the US is expected to remain as low as 3 million-3.5 million mt in July, compared to 3 million-4 million mt expected for June, traders said. Singapore typically receives about 5 million mt/month of arbitrage cargoes from the West, the traders said.

Singapore is also likely to receive about 1 million-1.5 million mt of HSFO from the Middle East in June, and the volume will likely be similar in July, market sources said. It typically receives about 1.5 million-2 million mt/month of HSFO from the Middle East.

The traders attributed the lower inflow to a narrow East-West spread as well as strong demand in the Middle East.

In addition to Saudi Arabia and Pakistan, Kuwait started buying HSFO for July delivery amid high demand for electricity. Kuwait Petroleum Corp bought two 80,000 mt cargoes of 380 CST HSFO with maximum 3.5% sulfur for delivery over July 1-2 and July 14-15 from Shell, trade sources said. Kuwait is typically an exporter of HSFO.
Source: Platts

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