Asia residue fuel market - Key market indicators this week

The Asian low sulfur marine fuel market is not expected to witness any significant upside from prevailing levels, traders said on the first trading day of the week June 29.

A lackluster sentiment was underpinned by expectations of a lack of incremental demand in June from the end-user bunker market, which was expected to turn in sales more or less steady from May, when low sulfur bunker fuel sales fell 7.08% on the month at 2.71 million mt. Singapore's June bunker fuel sales figures are expected to be released by the Maritime and Ports Authority of Singapore on July 13.

A tepid demand would lead the overall Asian marine fuels market to be long on supply going into trading second half July-loading product, said traders.

Residual fuel imports into Singapore in June crossed the 4 million mt mark for the first time since March, latest data released June 25 by Enterprise Singapore showed. As such, inventories within the Straits, including both onshore tanks and on floaters, is expected to be in the vicinity of 10 million mt for the near term.

The Asian high sulfur fuel oil market, however, was expected to garner support on account of incremental demand for the product as a burning fuel from the utilities sector within the region and the Middle East.

Singapore exported 98,900 mt of fuel oil to Bangladesh in the four weeks ended June 24, up from 18,302 mt recorded in the four weeks ended May 27, latest data from Enterprise Singapore showed. "Saudi Arabia and Bangladesh are buying high sulfur fuel oil, but supply is staying low," a Singapore-based fuel oil trader said June 26.

MARINE FUEL 0.5% SULFUR

**Reflecting a less-than-upbeat market sentiment, the market structure at the front of the Singapore marine fuel 0.5%S swaps curve was said to be trading steady to a touch lower in midmorning trades on July 29 compared with its Asian close on June 26. The Singapore Marine Fuel 0.5%S July/August swap was pegged at minus $7.75/mt in midmorning trades, said broking sources. The spread was assessed at minus $7.65/mt on June 26.

**The end-user IMO-compliant bunker fuel market was also expected to be bogged down by a supply overhang in the near term, said traders. The premium of Singapore-delivered 0.5%S marine fuel bunker to the Singapore 0.5%S marine fuel cargo fell to $24.52/mt on June 26 from a 15-week high at $36.08/mt on April 30, S&P Global Platts data showed.

**In North Asia, low sulfur marine fuel bunker prices in China continued to trend lower as domestic production of IMO-compliant product rises. Valuations were expected to be capped on a lack of incremental demand in the near term, said traders. The differential for 0.5%S marine fuel, delivered in China's bunkering hub of Zhoushan, to FOB Singapore 10 ppm gasoil cargo assessments widened $4.64/mt week on week to a discount of minus $29.38/mt on June 26, Platts data showed.

**Despite a relatively lower price, demand was expected to remain tepid in Japan too. Japan's low sulfur bunker prices had traded below other regional ports for most of June. Still, it has not helped attract buying interest. Delivered Tokyo Bay 0.5%S marine fuel averaged $302.30/mt over June 22-26, compared with $335/mt in Shanghai and $341.25/mt in South Korea, Platts data showed.

HIGH SULFUR FUEL OIL

**Reflecting market sentiment that the Asian HSFO market was expected to garner support, especially due to incremental demand from the utility sector, the market structure at the front of the Singapore IFO 380 CST HSFO swaps curve was said to be trading firmer in midmorning trades. The Singapore IFO 380 CST HSFO July/August swap was said to be pegged at minus 2.75/mt in midmorning trades June 29. The spread was assessed at minus $3.50/mt June 26.

**Saudi Arabia, Pakistan and Bangladesh have been among the main buyers of HSFO to meet their peak summer season utility demand, while supply is not expected to increase any time soon as refiners have yet to raise run rates significantly.

**Meanwhile in the downstream bunker market, demand and supply of Singapore-delivered IFO 380 CST bunker is expected to remain stable. The Singapore-delivered IFO 380 CST bunker premium to Singapore IFO 380 CST HSFO cargo assessments was assessed at $14.08/mt on June 26, stabilizing from a 14-week low at $12.24/mt on April 6, Platts data showed.