Asia residue fuel market - Key market indicators this week

Singapore — Asia residue fuel market - Key market indicators this week

Asian residual fuel market sentiment was mixed on the first trading day of the week starting June 15.

The mainstay marine fuel 0.5% market was not expected to witness any significant uptick from prevailing levels due to a lack of incremental demand coupled with ample supply.

The high sulfur fuel oil market though was expected to garner support on expectations of a pick up in demand from the utility sector, especially from the Middle East.

MARINE FUEL 0.5% SULFUR

* Reflecting a none too optimistic outlook, the market structure at the front of the Singapore Marine fuel 0.5% swaps curve remained more or less steady from it's Asian close on June 12. According to broking sources, Singapore Marine Fuel 0.5% July/August swap was pegged at minus $6.5/mt in mid-morning trades, a touch higher as compared to its assessment at minus $6.75/mt on June 12.

* Even as market sources estimate western arbitrage flow into Singapore to come in slightly lower at closer to 2.5 million mt for June as compared to 2.5 million-3 million mt for May, ample stockpiles of low sulfur material in and around Singapore will keep the market well-supplied, said traders.

* Residual fuel, a lion's share of which is said to be low sulfur, to the tune of around 9 million mt is estimated to be stored between onshore tanks and on floaters in and around Singapore.

* On the end-user bunker market side, market participants expect further pressure due to ample supply and weak demand. The Singapore-delivered Marine Fuel 0.5%S bunker premium to Singapore Marine Fuel 0.5% cargo, which touched a 13-week high of $36.08/mt on April 30, decreased to $25.72/mt on June 12, Platts data showed.

* While spot inquiries for the product increased on June 12 due to a drop in flat price on lower crude, traders anticipate overall demand to remain subdued with most inquiries for a lower-than-usual parcel size of under 1,000 mt.

* In other regional bunkering hubs, marine fuel 0.5% demand in South Korea is expected to remain weak on relatively higher prices compared with other ports. Delivered marine fuel 0.5% bunker Busan/Ulsan averaged $324.05/mt over June 8-12, compared to $295.30/mt in Japan and $314.40/mt in Shanghai, Platts data showed.

HIGH SULFUR FUEL OIL

* Asia HSFO market is expected to trade firm on stronger demand, led by refiners likely to favour high sulfur straight-run fuel oil as feedstock over medium/heavy crude as Saudi Arabia and other middle eastern producers have raised their crude official selling prices to Asian buyers.

* Reflecting an optimistic sentiment, the market structure at the front of the Singapore HSFO swaps curve was said to be trading firmer from its Asian close on June 12. According to broking sources, Singapore July/August 380 CST HSFO swap was said to be trading at minus $2.75/mt in mid-morning trades as compared to it's assessment at minus $3.25/mt on June 12.

* Meanwhile, Singapore-delivered 380 CST bunker premium is also expected to be supported at current levels due to steady demand, market sources said. The premium to the Singapore 380 CST HSFO cargo assessments was assessed at $17.86/mt on June 12, up from a 12-week low of $12.24/mt on April 6, Platts data showed.

* Elsewhere, Japan's high sulfur bunker fuel market is expected to firm up on lower supply, as refiners cut run rates, said traders. Tokyo Bay-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo flipped from a discount -- where it has traded in the last seven trading sessions -- of minus $1.11/mt on June 11 to a premium of $10.86/mt on June 12.