Asia's HSFO cash differentials fall to lowest since Dec 2025 on increasing supply

Asia's high sulfur fuel oil cash differentials declined July 7 to their widest discounts so far in 2026, weighed by expectations of increasing near-term supply from the Middle East, market sources said, adding that renewed tensions around the Strait of Hormuz may disrupt oil flows from the Persian Gulf.

Platts, part of S&P Global Energy, assessed the Singapore 380 CST HSFO cargo cash differential to the Mean of Platts Singapore 380 CST HSFO assessment at a discount of $3.08/metric ton at the Asia close July 7, compared with minus $2.58/mt July 6.

The benchmark 380 CST HSFO cash differential flipped into negative territory in the week ended July 4 and has seen pressure from aggressive selling interests for second-half July and early-August loading cargoes during the Platts Market on Close assessment process. The differential is at its weakest level since Dec. 19, 2025, when it was assessed at a discount of $3.12/mt, Platts data showed.

Platts assessed the Singapore 180 CST HSFO cash differential to the MOPS 180 CST HSFO assessment at a discount of $6.42/mt at the Asia close July 7, compared with minus $5.91/mt July 6, also its lowest level since Dec. 8, 2025, when it was assessed at a discount of $6.58/mt, Platts data showed.

Alongside increased supply, HSFO market fundamentals were also pressured by muted feedstock demand for the residual fuel grade from regional refiners and by lackluster downstream bunker fuel demand, according to market sources.

"We have drawn down the inventory ... But I think the market is expressing that supplies are coming in," said one Singapore-based trader, adding, however, that transit risks through the Strait of Hormuz could slow export volumes from the Middle East.

"But, for now, we don't see it as a problem ... At least until the next Strait of Hormuz closure (if any)," the trader added.

"The Middle East barrels won't be as much as prewar time anyway ... So, it's unlikely that there will be oversupply [in August]," noted another trader.

Muted Chinese feedstock demand

Chinese feedstock demand for HSFO has been thin in recent weeks, multiple trade sources told Platts, with one trader not expecting any "sudden uptake" of feeds, especially from the independent refiners.

Platts assessed the front-month Singapore 380 CST HSFO crack against prompt-month Brent crude at minus $7.34/barrel July 7, weakening from minus $6.37/b July 6. The refining margin has shed about 14% so far this week, Platts data showed.

"China has not been buying much fuel oil from Singapore in recent weeks ... Unless the Middle East summer power generation demand absorbs a lot of oil, there will be additional supplies flowing into Singapore, keeping the market under pressure in the coming weeks," a Singapore-based fuel oil trader said.

The Platts-assessed Singapore-delivered 380 CST HSFO bunker premium over the FOB Singapore 380 CST HSFO cargo assessment, which was assessed at $27.85/mt July 7, was assessed about 15% lower week over week at $20.35/mt in the week ended July 4, Platts data showed.

The Singapore 380 CST HSFO balance July-August swaps time spread was pegged at minus $2.75/metric ton in midafternoon Asian trading July 8, compared with the Platts assessment of the spread at a contango of $3/mt at the Asian close July 7, while the August-September spread was pegged at a narrow backwardation of $1.50/mt in midafternoon Asia trading July 8, against 30 cents/mt on July 7.

The M1-M2 intermonth spread for the 380 CST HSFO grade averaged at a backwardation of $6.62/mt in June, compared with an average of $37.74/mt in the preceding month, according to Platts data.