Asia residual fuel - Key market indicators this week

Singapore — Shipowners are actively beginning to procure low sulfur fuel oil for January following a slowdown in December ahead of the festive season, setting the market in recovery mode. In the 180 CST high sulfur fuel oil market, short-term demand from the power generation sector in Sri Lanka as its sole refinery shuts for maintenance, is expected to offset some of the waning demand from other regions.

MARINE FUEL 0.5% SULFUR

** The Singapore Marine Fuel 0.5%S January-February contango early Dec. 21 was stable from the Dec. 18 assessment of minus 90 cents/mt, with bids at minus $1.50/mt against offers at minus 40 cents/mt, Intercontinental Exchange and brokers' data showed.

** End-December Singapore delivered 0.5% sulfur marine fuel demand continued on a lackluster note, although most suppliers had cleared inventories in anticipation of weaker demand in the last month of the year.

** With FOB Singapore 10 ppm sulfur gasoil and FOB Singapore 92 RON gasoline margins recovering in December, traders noted the likelihood of marine fuel supply in Asia increasing as refiners raise run rates.

** In Northeast Asia, ongoing barge and berth congestion at Japan's key port of Tokyo Bay is expected to persist into January 2021, as barge companies shutdown over Dec. 26-Jan 3. Due to the heavy congestion, Japan's largest refiner ENEOS has ceased accepting new nominations for this year at Tokyo Bay.

HIGH SULFUR FUEL OIL

** According to brokers' indications and ICE data, discussions for the Singapore 380 CST HSFO January-February timespread opened Dec. 21 at $1.85/mt, narrower than the Dec. 18 assessment of $2/mt, with offers seen at $2.10/mt against no bids in the morning.

** Temperatures have dropped in HSFO-importing countries such as Saudi Arabia, Pakistan and Bangladesh, with the onset of winter, limiting demand. On the other hand, high prices of LNG can lead to an increase in HSFO demand, a trader added.

** A mid-February 2021 shutdown for 45 days of planned maintenance at Sri Lanka's sole refinery at Sapugaskanda is expected to drive up short-term HSFO demand to meet the country's power generation requirements. Ceylon Petroleum Corp. is seeking an additional six fuel oil cargoes over January and February.

** The anticipated demand for January has also begun to manifest in the Singapore 180 CST HSFO swaps market, with Platts data showing that the January-February swap market structure flipped from a contango of 25 cents/mt on Dec. 10 to flat on Dec. 11, before progressively widening to a $1.20/mt backwardation Dec. 18.

** Demand for 380 CST high sulfur bunkers continued to be robust as more shipowners seek volumes for delivery in the first week of 2021.