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VLSFO crack drops from 7-month high as crude gains

Asia’s 0.5% very low-sulphur fuel oil (VLSFO) crack dropped on Friday, falling from a more than seven-month high in the previous session as crude oil prices extended gains.

Crude oil prices hit a fresh three-year high on Friday, climbing above $85 a barrel on forecasts of a supply deficit over the next few months as rocketing gas and coal prices stoke a switch to oil products.

The front-month VLSFO crack fell to $13.04 a barrel above Dubai crude, down from Thursday’s $13.98 a barrel and its highest since March 5, Refinitiv Eikon data showed.

The front-month crack was at a more than four month low of $10.56 on Oct. 5.

The VLSFO market has firmed since the start of the month on expectations of increased fuel oil demand from regional utilities amid soaring natural gas prices and lower output from refiners as they maximise production of other, more valuable, refined fuels, trade sources said.

Meanwhile, residual fuel inventories at the Amsterdam-Rotterdam-Antwerp (ARA) and Singapore hubs rose this week, while those in the Fujairah hub fell sharply, official data showed.

Fuel oil stocks in the ARA refining and storage rose by 6%, or by 63,000 tonnes, to 1.11 million tonnes in the week ended Oct. 14, data from Dutch consultancy Insights Global (IG) showed.

Compared with last year, however, the inventories at the ARA hub were 9% lower and below the five-year seasonal average of 1.2 million tonnes.

In Singapore, fuel oil inventories rose 4% to a five-week high of 21.55 million barrels, or 3.39 million tonnes, despite persistently weak net imports.

In the Fujairah hub, fuel oil stockpiles were 13% lower to an two-week low of 7.08 million barrels, or 1.12 million tonnes amid higher exports and firmer bunkering demand.

Gunvor bought a 20,000-tonne 180-cst high-sulphur fuel oil (HSFO) cargo for PetroChina while Trafigura sold a 40,000-tonne 0.5% very low-sulphur fuel oil (VLSFO) cargo to Free point.
Source: Reuters

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