Asia residue fuel market - Key market indicators this week

Singapore — The expectation that cargo inflow in October would decline is supporting Singapore Marine Fuel 0.5%S, while the market is also getting support from the downstream delivered bunker market, which sees tightness in barge supply.

High sulfur fuel oil market continued to see steady demand as more scrubber-fitted ships are coming into operations. Demand from power sector has peaked out, but Saudi Arabia is expected to buy 380 CST high sulfur fuel oil in the fourth quarter.

MARINE FUEL 0.5%S

- Singapore Marine Fuel 0.5%S strengthened in the week of Sept. 14-18, as arbitrage cargo in October inflow will be lower than September. This is expected to give support to the market as the October/November spread was pegged at minus 25 cents/mt as of 11 am Singapore time on Sept. 21, unchanged from Sept. 18. It stood at minus 2.85/mt on Sept. 11.

- The spread between 10 ppm sulfur gasoil and Marine Fuel 0.5%S narrowed in the week of Sept. 14-18, while traders attributed it to weaker gasoil prices. The spread narrowed to $13.16 on Sept. 16, the lowest since May 8, when it was at $13.06/mt. "The 10 ppm gasoil has not been blended LSFO yet, but it will be soon [if the spread keeps narrowing], especially higher sulfur grade, as the value of higher sulfur gasoil is lower," said a trader.

- Demand for low sulfur bunker fuel was stable in the week ended Sept. 18. Barge avails remain tight with some suppliers citing earliest barge avails from end-September. The Singapore-delivered Marine Fuel 0.5%S bunker premium to Singapore Marine Fuel 0.5% cargo increased to $16.79/mt on Sept. 18 from $15.01/mt on Sept. 11, S&P Global Platts data showed.

- Supply of low sulfur bunker fuel in South Korea tightened considerably in the week ended Sept. 18, as refiners further trimmed run rates. As volumes are expected to remain low for the rest of September, prices are likely to find a floor. Busan/Ulsan delivered marine fuel 0.5%S differential to FOB Singapore 10 ppm sulfur gasoil cargo assessments was up $6.75/mt week on week at $7.05/mt on Sept. 18., Platts data showed.

- In Hong Kong, demand continued to remain depressed due to the 14-day quarantine rule for cargo ships, with sources estimating some 70% drop in demand since August. Suppliers had stopped some operations and reduced cargo procurement. Hong Kong delivered marine fuel 0.5%S differential to FOB Singapore 10 ppm sulfur gasoil cargo assessments was down $16.24/mt week on week at minus $29.45/mt on Sept. 18, Platts data showed.

HIGH SULFUR FUEL OIL

- In spite of continued purchases of high sulfur fuel oil out from Saudi Arabia from the region for its power generation needs, traders expect the demand to be balanced out by more HSFO supply from Kuwait in the last week of September, with at least 120,000 mt of HSFO expected to load over this period, according to traders based in Singapore.

- The Asian HSFO crack spread, measured as the difference between the front-month Singapore 380 CST HSFO swap and the Asian Dubai crude swap, was assessed at minus $3.82/b on Sept. 18, the lowest spread since Aug. 11 when it was assessed at minus $4.18/b.

- Discussions for high sulfur bunker fuel was stable in the week ended Sept. 18. Market participants continue to see steady demand for HSFO as Singapore remains one of the few ports in the region allowing crew changes amid the COVID-19 pandemic, sources said. Consequently, a couple of suppliers have tight barge availability with the earliest deliveries from Sept. 25.

- The Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments decreased to $14.91/mt on Sept. 18 from $16.40/mt on Sept. 11, Platts data showed.