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Tightening supply push Singapore HSFO spreads to fresh year-to-date highs

The front-month spreads for Singapore high sulfur fuel oil swaps remained on an uptrend amid tightening supply to hit fresh year-to-date highs on Thursday.

The Singapore August/September 180 CST spread stood at $7.25/mt at 4:30 pm Singapore time (0830 GMT) Thursday. It was also last higher on May 29, 2015, at $14.50/mt, data from S&P Global Platts showed.

The Singapore August/September 380 CST spread stood at $8.10/mt at 4:30 pm Singapore time Thursday. The spread was last higher on May 29, 2015 at $12.25/mt, Platts data showed

Supply tightness in the Singapore 380 CST high sulfur fuel oil market kept prices high on low inflow of arbitrage cargoes, traders said Wednesday.

“The volume of arbitrage cargoes in August will be higher than in July, but still lower than normal,” a Singapore-based trader said.

Arbitrage supply in July is expected at around 3.5 million mt, against typical monthly volumes of about 5 million mt into Singapore. For August, Singapore is expected to receive 3 million to 4 million mt and may increase later, traders said.

The cash differentials for both 180 CST and 380 CST grades jumped Thursday amid supply tightness. The 180 CST cash differential jumped to $6.25/mt Thursday, up $2.88/mt from Wednesday. It was the highest since December 3, 2014, when it was assessed at $7.55/mt, Platts data showed. The 380 CST cash differential also climbed to $6.88/mt, up $0.60/mt from Wednesday. It was last assessed higher at $7.19/mt on June 18, 2015, according to Platts data.

The crack spread between August 180 CST HSFO swaps and the same month Dubai crude swaps also gained to minus $1.252/barrel, the highest since September 17, 2017, Platts data showed. Strong demand in the Middle East for power generation to meet summer electricity demand has reduced the arbitrage inflow from the region, industry sources said.

The strength seen in the Singapore fuel oil market could also open the possibility of arbitrage barrels moving from the west, sources added.

Singapore’s bunker fuel sales in June rose 2.2% year on year to 3.92 million mt, preliminary data released by the Maritime and Port Authority of Singapore showed.
Source: Platts

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