Asia residual fuel market - Key market indicators this week

Singapore — Asia residual fuel markets are expected to be supported as trading picks up for December-loading cargoes, traders said.

Traders added they expect markets -- both low sulfur and high sulfur -- to remain balanced going into the end of 2020.

Even as demand is not expected to see any significant upside, traders attributed a steady underlying fundamental to the likelihood that refiners were unlikely to bump up run rates for the rest of the year.

Marine fuel 0.5%S

** Singapore marine fuel 0.5%S valuations reflect a sentiment that the market is expected to remain supported to firm in the near term, sources said. The premium for FOB Singapore marine fuel 0.5%S cargo over the Mean of Platts Singapore marine fuel 0.5%S assessments has hovered at a multi-month high so far this month. It was assessed at $1.83/mt at the Asian close on Nov. 13 after it touched a nine-month high of $1.92/mt at the start of the month.

** The market structure at the front of the marine fuel 0.5%S swaps curve was also steady in mid-morning trades on Nov. 16. The Singapore December/January marine fuel 0.5%S swap was pegged at around $1.5/mt compared to its Asian close of $1.60/mt on Nov. 13, said Singapore-based sources.

** Singapore ex-wharf term contracts for December-loading marine fuel 0.5%S bunker were being offered at a premium in the mid-teens to FOB Singapore marine fuel 0.5%S cargo assessments, while term contracts for November-loading product were concluded at a premium of $5-$5.50/mt, sources said.

** Elsewhere, a drop in cargo imports in response to poor demand has pushed the Hong Kong-delivered marine fuel 0.5%S differential to benchmark FOB Singapore 10 ppm gasoil cargo assessments up from an average of minus $12.18/mt in October to plus $1.27/mt to date in November. Demand for International Maritime Organization-complaint bunker fuel in Hong Kong has collapsed 80%-90% since the mandatory quarantine rule for cargo ships was imposed late-July, traders said.

** Meanwhile, an easing of supply tightness in South Korea has led to marine fuel 0.5%S bunker prices at it's main ports dropping to levels comparable to other North Asian bunkering hubs. Busan/Ulsan-delivered marine fuel 0.5%S bunker has averaged $342.65/mt month to date compared to $347.90/mt in Shanghai and $341.95/mt in Japan.

HSFO

** The Singapore high sulfur fuel oil market is expected to trade steady to firm from prevailing levels as trading picks up for December-loading cargoes, said traders.

** The market structure at the front of the Singapore HSFO swaps curve reflected this optimism. Singapore December/January 380 CST HSFO swaps were pegged at $3.25/mt in mid-morning trade on Nov. 16, up slightly from its Asian close of $3/mt on Nov. 13.

** Meanwhile, traders said that demand so far in November has remained steady to slightly firmer compared to October. Even as Singapore's overall bunker sales fell 1.5% month on month to 4.15 million mt in October, 380 CST high sulfur bunker fuel sales rose 14.8% from September to 1 million mt, a year-to-date high for the mainstay bunker fuel, which accounted for 24.22% of total sales.

** The Singapore-delivered 380 CST high sulfur bunker fuel spot market premium, which has so far this month been trading steady at high teens to FOB Singapore 380 CST HSFO cargo, is expected to be maintained as the market is likely to be balanced going into December, said traders.