Asia residual fuel market - Key market indicators this week

Singapore — Asia residual fuel markets are expected to be supported going into the last trading week of the month.

An optimistic sentiment was underpinned by expectations that the markets -- both low sulfur and high sulfur -- would remain balanced going into trading second half February loading cargoes.

Marine fuel 0.5% sulfur

** In the end-user low sulfur marine bunker fuel markets, the volume of spot trading activity across major bunkering hubs of Singapore and Fujairah was likely to hinge on the direction that flat price would take in the ensuing days, traders said.

** Even so, valuations were likely to remain supported, if not inch higher, from prevailing levels, as the market starts trading early-February delivery product.

** Optimism around the direction that the upstream Singapore marine fuel 0.5%S market was likely to take in the near term would bode well for the marine fuel 0.5%S bunker market.

** A prevailing bullish sentiment was attributed to expectations of a sustained incremental demand, at least in the near term, for low sulfur fuel oil as a burning fuel from within the region amid steady downstream demand for the product as marine fuel.

** As such, term contracts for ex-wharf Singapore marine fuel 0.5%S bunker for February-loading was being discussed at a premium of around $5-$5.5/mt to FOB Singapore marine fuel 0.5%S cargo assessments as compared to $2-$2.5/mt levels at which contracts were inked for January, traders said.

** The cash differential of the FOB Singapore Marine Fuel 0.5%S assessment was assessed at an 11-month high of $5.16/mt Jan. 22, S&P Global Platts data showed.

** Elsewhere in Japan, low sulfur bunker premium was expected to stay elevated on competing utility demand for the product. Tokyo Bay-delivered marine fuel 0.5%S premium to FOB Singapore marine fuel 0.5%S cargo assessments was up $8.87/mt on the week at $30.29/mt on Jan. 22, Platts data showed.

** Bunker demand in Hong Kong was expected to be subdued, with the upcoming implementation of a surcharge ahead of the Lunar New Year holidays to compensate crew for working over that period.

High sulfur fuel oil

** Singapore high sulfur fuel oil market was also likely to trade steady around prevailing levels on pockets of regional demand, which was expected to be sustained going into February, traders said.

** HSFO demand from Kuwait and Sri Lanka continue unabated, as Kuwait Petroleum Corp. and Ceylon Petroleum Corp. undertake upgrading and maintenance work at their refineries, sources at both the state-owned companies said.

** After buying four 80,000 mt HSFO cargoes for January to meet its domestic power demand, KPC was likely to look for February-delivery product as well, the company source said.

** Sri Lanka's Ceypetco was also expected to come to the market to buy an HSFO cargo for H2 February delivery, the company source said.