Asia residue fuel market - Key market indicators this week

Singapore — Despite recent gains in the Singapore Marine Fuel 0.5%S swaps market, it is unlikely to result in an increase in production at refineries, traders said, as middle distillate crack spreads come under pressure.

Refinery supply is therefore expected to remain low for October, fuel oil traders based in Singapore said, while October-arrival light sulfur fuel oil cargoes in Singapore are expected to total 1.5 million mt, about 1 million mt lesser than September-arrival cargoes.

MARINE FUEL 0.5% SULFUR

- The Singapore Marine Fuel 0.5% November-December timespread was stable early Oct. 5 at 75 cents/mt from Platts' Oct. 2 assessment, brokers' indications showed.

- The recent gain in the Singapore Marine Fuel 0.5%S values is not expected to have much impact on LSFO production rates at most refineries, traders said, as middle distillate margins have come under pressure, leaving LSFO margins a secondary concern. Asian refiners are running their refineries at an average of around 70%, industry sources said.

- In the North Asian market, demand in China, South Korea and Hong Kong was largely muted in the week ended Oct 2 due to national holidays.

- Supply is expected to remain tight in South Korea, with refiner Hyundai Oilbank not offering in the spot market till Oct. 10, market sources said. A few traders said their earliest delivery dates are from Oct. 12. Refiners continue to keep run rates low amid the decline in refining margins for middle distillates like gasoil. Meanwhile, the congestion at South Korea's Busan port after two typhoons had hit the region recently is expected to cause further delays and disruptions at the port, market sources said.

- The Busan/Ulsan delivered marine fuel 0.5%S differential to FOB Singapore 10 ppm sulfur gasoil cargo assessments was up $2.71/mt week on week at $15.80/mt on Oct. 2, Platts data showed.

HIGH SULFUR FUEL OIL

- According to brokers' indications, the Singapore 380 CST high sulfur fuel oil November-December timespread was stable during mid-morning trade in Asia at minus $1.25/mt compared with Platts' Oct. 2 assessment.

- The Singapore HSFO market is expected to remain firm as supply is unlikely to increase amid refiners' run cuts. The balance October-November spread has been backwardated since Oct. 1, reflecting the supply situation.

- North Asian refiners have indicated that their appetite for straight run fuel oil are likely to diminish from November onwards, as crude oil prices have become more competitive.

- In the Singapore delivered bunker market, suppliers indicated that a shortage of prompt cargo was driving premiums higher, with the tightness expected to ease by Oct. 10.

- The Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments increased to $22.57/mt on Oct. 2 from $18.09/mt on Sept. 25, Platts data showed.