Asia residual fuels: Key market indicators for Sept 20-24

The Asian low sulfur fuel oil market is likely to be supported in the near term as demand from the end-user bunker fuel market is expected to remain steady to firm going into the fourth quarter, traders said.

An optimistic sentiment was more apparent on the Asian high sulfur fuel oil front, where the market for both 380 CST HSFO and 180 CST HSFO were expected to remain firm going well into second half October loading trades.

Marine Fuel 0.5%S

** Singapore marine fuel 0.5%S market will be supported as the volume of western arbitrage product was unlikely to rise from September level, which is estimated at about 2 million mt, lower than the usual 2.5-3 million mt that typically arrives East.

** A bullish sentiment was also underpinned by a slight tightness in product availability due to a lack of blending components, traders said.

** In the end-user bunker fuel market, sellers were keen to move oil, especially on a prompt basis, due to a strongly backwardated market structure. The backwardation at the front of the Singapore marine fuel 0.5%S swaps curve averaged $4.78/mt so far in September, up from August's average of $2.95/mt, S&P Global Platts data showed.

** The premium for Singapore-delivered marine fuel 0.5%S bunker over FOB Singapore marine fuel 0.5%S cargo assessments averaged $6.49/mt in the week ended Sept. 17, down $1.06/mt on the week.

** The Middle Eastern port of Fujairah, which has witnessed an uptick in demand in the recent months, continued the trend for August too. Latest data released on Sept. 15 by the Fujairah Oil Industry Zone showed that low sulfur bunker fuel sales were up 1.27% month on month to 542,931 cu m, while high sulfur bunker fuel sales rose 8.08% from July to 129,410 cu m.

** Firm demand had led heavy distillates stocks in Fujairah to fall to a near 6-month low of 7.471 million barrels in the week ended Sept. 13, down 14.4% on the week, latest data released Sept. 15 by FOIZ showed.

** Tight availability of domestically produced low sulfur fuel oil has led Zhoushan ex-wharf marine fuel 0.5%S bunker premium over Singapore marine fuel 0.5%S cargo to pick up, as sellers have raised offers to $5-$10/mt up from $2-$4/mt in the recent past.

** In South Korea, availability is expected to improve as one of the refiners, which earlier stopped offering product into the spot market, would restart supplies from Sept. 23, traders said.

High sulfur fuel oil

** Singapore HSFO market is expected to remain strong as demand from South Asia utilities sector continue unabated. Bangladesh is expected to import around 400,000 mt of HSFO in September, up 6.7% from August, Platts reported earlier. Pakistan State Oil closed a tender to buy two 65,000-mt of 180 CST HSFO for the second half of October delivery.

** Current lofty HSFO valuations have led some of the refiners to funnel product into this market. South Korea's GS Caltex sold 40,000 mt of 380 CST HSFO for Oct. 11-16 loading from Yeosu due to strong HSFO valuations as compared to a relatively sluggish asphalt market, traders said.

** In the downstream market, high sulfur bunker fuel inquiries at Hong Kong is expected to be strong with inquiries coming mostly from scrubber-fitted container ships, traders said. Hong Kong-delivered 380 CST bunker premium over Singapore 380 CST HSFO cargo averaged $38.16/mt for the week ended Sept. 17, which was a near 1-year high.

** Tight availability for HSFO at South Korea has meanwhile, led the premium for 380 CST HSFO bunker delivered at Ulsan and Busan to rise to a 9-month high of $53.07/mt on Sept. 17, Platts data showed.