Asia residue fuel market - Key market indicators this week

Singapore — The recent strength in the Singapore Marine Fuel 0.5%S market against Singapore 10 ppm gasoil assessments has curbed some North Asian refineries' appetite to procure spot low sulfur fuel oil volumes to meet term commitments, leading to an even tighter downstream supply in light of the prevailing reduction in Asian refineries' run rates, traders said.

In the high sulfur fuel oil market, Saudi Arabia's demand for cargoes over the fourth-quarter, albeit lower compared with Q3, is expected to maintain the region's balance.

MARINE FUEL 0.5% SULFUR

- The Singapore Marine Fuel 0.5% September/October timespread in the morning of Sept. 28 was at 50 cents/mt, wider from the 25 cents/mt assessment at the Asian close on Sept. 25, brokers' indications showed.

- The Singapore Marine Fuel 0.5%S market is expected to stay strong, supported by diminishing supply, as refiners continue to operate at reduced rates, while demand is stable, traders said. Reflecting the tight supply, the Marine Fuel 0.5%S cash differential rose to 75 cents/mt on Sept. 25, the highest since July 29, Platts data showed.

- Asian refiners are currently running their run rates at around 70% on average, market sources said, with exports of low sulfur fuel oil, particularly from Taiwan and Thailand having declined in recent months as a result. Exports in October is also expected to be reduced as refineries focus on meeting domestic bunker demand.

- In the North Asian market, ahead of China's golden week holidays, demand is being supported by an increase in orders that have led to limited availability of barges in the port city of Zhoushan, where the delivered marine fuel 0.5%S differential to FOB Singapore 10 ppm sulfur gasoil cargo assessments rose $16.55/mt week on week to minus $1.90/mt on Sept. 25, Platts data showed.

- Tighter supply is also expected in South Korea, with Hyundai Oilbank not offering bunker fuel in the spot market till Oct. 10, sources said. The Busan/Ulsan delivered marine fuel 0.5%S differential to FOB Singapore 10 ppm sulfur gasoil cargo assessments reflected this tightness, rising $6.04/mt week on week to $13.09/mt on Sept. 25, Platts data showed.

HIGH SULFUR FUEL OIL

- According to brokers' mid-morning indications, the Singapore 380 CST high sulfur fuel oil October/November timespread was wider at minus 50 cents/mt compared with the Sept. 25 assessment of minus 25 cents/mt.

- Saudi Arabia's purchases of high sulfur fuel oil over the fourth quarter are expected to support the Singapore 380 CST high sulfur fuel oil market, although the country's demand has declined since the end of its peak summer demand in Q3, market sources said. The 380 CST HSFO cash differential rose to $1.74/mt on Sept. 25, up from $1.45/mt a week earlier, Platts data showed.

- On the other hand, demand for straight run fuel oil is expected to decline, as the official selling prices were cut for October-loading crude oil from the Middle East, reducing its competitiveness.

- High sulfur bunker fuel was stable in the week ended Sept. 25, as market participants expect demand to hold steady given that Singapore remains one of the few regional ports allowing crew changes amid the COVID-19 pandemic, industry sources said. Consequently, a couple of suppliers are experiencing tight barge availability with earliest deliveries from Oct 4.

- The Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments increased to $18.09/mt on Sept. 25 from $14.91/mt on Sept. 18, Platts data showed.