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Weakening Singapore marine fuel spread unlikely to deter Asian refiners: sources

A gradually declining Singapore Marine Fuel 0.5% crack spread over March is unlikely to deter Asian refiners from targeting additional spot sales in April, local refining sources said late March 17, as the crack still remains more competitive to the gasoil crack spread.

The Singapore marine fuel 0.5% crack spread — which hit its lowest since Jan. 26 at $12.69/b on March 17, as per S&P Global Platts data — has mostly been on downtrend since hitting a one-year high of $15.90/b Feb. 23.

A combination of factors such as increased arbitrage volumes from the West into Singapore in March, estimated at about 3 million mt, up from the nearly 2.3 million mt in February, according to Singapore-based traders, as well as more spot sales from refineries contributed to the recent downward pressure.

However, a relatively weaker Asian gasoil market has seen some refiners looking to maintain low sulfur fuel oil output and sales in April, after March saw increased spot volumes coming out of India, Thailand and Taiwan.

Among the refiners targeting continued spot activity in April are Taiwan’s CPC, which has already sold a 40,000 mt LSFO combination parcel loading in the first week of April, and is looking into the possibility of matching its March exports of 80,000 mt as “margins still remain quite good.”

Similar sentiments were echoed by Japanese refiner Cosmo Oil, with a company source saying it was likely to issue a LSFO sell tender “next week for H2 April-loading cargo,” after selling a rare March-loading cargo, with LSFO market yielding better returns at the moment than gasoil.”

Before March, the company last sold a LSFO parcel via tender loading early-December from Chiba, Platts reported earlier.

The Asian gasoil market has come under some supply-side pressure since the start of the month while regional demand has stayed the same for months, according to a Singapore-based trader, with healthy exports, especially from China, casting a pall over sentiment. Platts previously reported that China’s gasoil exports may reach an 11-month high of 2.29 million mt in March, with some traders forecasting the total could be as high as 2.6 million mt.

Similar to CPC and Cosmo Oil, India’s Nayara Energy, which according to a company source, “looks to produce fuel oil when the crack is good” has already sold a April 1-5 loading parcel of 0.3% fuel oil from Vadinar, after selling two cargoes in the first quarter.

However, not every refinery that increased LSFO sales in March is looking to follow suit in April, notably India’s Mangalore Refining and Petrochemical Ltd. and Bharat Petroleum Corp. Ltd., with company sources at both refineries stating they would not be matching their March LSFO exports of 80,000 mt and 50,000 mt respectively.

“We had higher March output because it is also the last month of the Indian financial year, so we had some production targets to meet, which was why our crude throughput was higher; we saw that marine fuel [0.5%] cracks were best, hence the increased output; it’s early to saw but we’re unlikely to have [LSFO] exports in April,” said a source at BPCL.
Source: Platts

 

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