Asia residual fuels: Key market indicators for July 19-23

ICE Brent futures September contract were trading at $72.55/b at 0145 GMT July 19, down from the $73.61/b level at 0830 GMT July 16, Intercontinental Exchange data showed.

In Asia, rising demand for fuel oil from Pakistan in August and September has seen higher premiums for spot HSFO cargoes loading over late-July, which are typically used for blending.

Marine Fuel 0.5%S

** Discussions for the Singapore Marine Fuel 0.5%S August/September spread July 19 were rangebound with bids for the spread at $2/mt against offers at $3.50/mt, according to Intercontinental Exchange data.

** Singapore fuel oil traders estimate the August low sulfur fuel oil arbitrage flow of cargo from the West into the Straits at lower than July's levels of about 2.2 million mt.

** The premium for supply of Singapore ex-wharf marine fuel 0.5%S bunker on a term contract basis for August dates was heard offered at $3.50-$4.50/mt on the last trading day of the week ended July 16.

** Industry sources said that balance July dates are currently being inked at a premium of $3-$3.50/mt over Singapore Marine Fuel 0.5%S cargo assessments, compared with a premium of $1.50-$2.00/mt for offers made in June for July supply.

** In North Asia, suppliers in Zhoushan continue to compete with each other amid high inventories, market sources based there said. Low sulfur fuel oil production in China remains steady, contributing to ample supply, the sources added.

** China has eased the prevention measures for ships coming from India, but some regulations are still there in Zhoushan, capping bunker demand, industry sources said. Reflecting the weaker demand, the delivered Zhoushan 0.5%S marine fuel bunker price has fallen below the Singapore price since July 14.

** Meanwhile, Hong Kong has been seeing strong demand since the 14-day mandatory quarantine rule for crew members under COVID-19 restrictions was lifted a month ago, while supply for 0.5%S sulfur grade is likely to remain sufficient.

** The port is yet to see a full recovery in bunker demand after the 14-day mandatory quarantine was lifted, Hong Kong bunker industry sources said, attributing the slow recovery to lower bunker prices in mainland Chinese ports and shipowners' reluctance for bunker-only calls in Hong Kong amid high freight rates.

High Sulfur Fuel Oil

** According to ICE data, morning discussions for the August Singapore 380 CST/Rotterdam high sulfur fuel oil spread inched lower to $12/mt July 19, from the July 16 spread at $12.10/mt.

** After Pakistan LNG Ltd. cancelled procurement tenders for spot LNG, Pakistan State Oil has since issued seven new buy tenders for fuel oil to meet utilities demand, the first of which closes at the end of the week of July 26.

** The rise in demand for high sulfur fuel oil saw the cash differential to the FOB Singapore 180 CST HSFO assessment rise to a five-month high on July 15 at $3/mt, before falling to $1.44/mt July 16, S&P Global Platts data showed.

** Demand to meet the specifications of the cargoes sought by PSO has also seen higher prices paid for spot high sulfur fuel oil cargoes sold by India's BPCL and HPCL, market traders said.

** In North Asia, the 380 CST high sulfur bunker supply in Hong Kong is expected to remain tight for the rest of July when replacement cargo is scheduled to arrive, said a bunker supplier based there.

** Bunker suppliers hold 380 CST bunker grade only to meet demand and supply has been thin after the IMO 2020, market sources said.

** Hong Kong's 380 CST price was the highest in Asia over June 24-July 6, and has been the second highest since July 7 after Japan, reflecting the tightness, Platts data showed.