Asia residue fuel - Key market indicators this week

Singapore — Asia's low sulfur residual fuel market is expected to trade in a narrow range with no major upside expected in the near term.

Market sources attribute a lackluster sentiment to ample availabilities by way of inventories in and around Singapore. Further, supply is expected to see a slight uptick going into June on incremental output from refineries within the region, traders said.

MARINE FUEL 0.5%

- A lack of optimism was reflected in the market structure at the front of the Marine Fuel 0.5%S swaps curve. According to broking sources, Singapore Marine Fuel 0.5%S June/July swaps was pegged slightly lower at minus $6.25/mt mid-morning Monday, as compared with minus $6/mt at the Asian close on Friday.

- The contango market structure is unlikely to rebound any time soon, given the current high inventories, market sources said. A lackluster end-user bunker fuel demand led Singapore's heavy distillate stocks to rise 13.9% week on week to a two-month high of 24.987 million barrels, or 3.93 million mt, in the week ended May 13, the latest Enterprise Singapore data showed.

- The spread between Singapore gasoil 10 ppm and Singapore Marine Fuel 0.5%S cargo has widened to a six-week high of $27.81/mt on Friday, Platts data showed. Refinery run cuts have helped support the gasoil market, while a relatively weak bunker fuel demand so far this month has capped the low sulfur marine fuel market, traders said.

- On the end-user side, market participants expect further downward pressure due to a supply overhang amid weak demand. Singapore-delivered Marine Fuel 0.5%S bunker premium to Singapore Marine Fuel 0.5% cargo, which touched a ten-week high of $36.08/mt on April 30, fell to $11.39/mt Friday, Platts data showed.

- In the Middle Eastern bunkering hub of Fujairah, demand for the IMO-compliant marine fuel is expected to remain subdued in the near term, traders said. Recent inquiries have mostly been for lower-than-usual parcel size of below 1,000 mt due to cautious buying sentiment, traders said.

- Bunker premiums across most North Asia's bunkering ports are expected to be capped as supply continues to overwhelm, despite initial signs of a demand recovery. Shanghai-delivered Marine Fuel 0.5%S bunker premium to benchmark Singapore Marine Fuel 0.5%S cargo assessments has declined from $26.39/mt at the start of the month to $16.39/mt on Friday, while the same spread for the similar grade delivered in Hong Kong fell from $21.39/mt to $11.39/mt during the same period, Platts data showed.

HIGH SULFUR FUEL OIL

- The erstwhile 380 CST HSFO market is expected to remain bogged down due to a supply overhang, traders said.

- Traders attributed a weak market sentiment to the supply overhang from incremental volumes being sent East as US-based refiners switch away from HSFO as a feedstock.

- Reflecting this weak sentiment, the market structure at the front of the Singapore 380 CST HSFO swaps curve was reported trading at around minus $6.75/mt mid-morning Monday, down from its close of minus $6.50/mt on Friday.

- Still, sellers were not keen to offer down to attract buying interest, as the current contango would well cover the approximate storage cost of $5/cu m per month to keep oil in floating storage, traders said.

- Singapore-delivered 380 CST bunker premium is expected to hover at current levels on stable demand, market sources said. The Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments was assessed at $16.55/mt on Friday, stabilizing from a ten-week low of $12.24/mt on April 6, Platts data showed.