Asia residual fuel market - Key market indicators this week

Singapore — Falling demand for 180 CST and 380 CST high sulfur fuel oil from the power sectors in South Asia and the Middle East is weakening sentiment in both markets, but in the case of the 380 CST grade, strong demand from the Singapore bunker market was providing some support.

Margins for Marine Fuel 0.5%S were holding strong, but bunker demand for the grade was weakening, capping price increases, and pushing the Singapore cash differential assessment to a discount for the first time in nearly three months on Dec. 11.

MARINE FUEL 0.5% SULFUR

** In Singapore, after a brief recovery in demand, inquiries for marine fuel 0.5% sulfur bunkers fell again to end the week of Dec. 7 on a bearish note, as February ICE Brent crude futures surged above the $50/b mark.

** The Singapore Marine Fuel 0.5%S January-February contango narrowed slightly Dec. 14 morning to be pegged at minus $1/mt from the Dec. 11 assessment of minus $1.25/mt, with bids seen at minus $1.50/mt against no offers, Intercontinental Exchange and brokers' data showed.

** Supply rise in Asia weighs on Singapore Marine Fuel 0.5%S market. Indian refiners like Mangalore Refining and Petrochemical Ltd. raised refinery run rates amid stronger domestic demand, resulting in higher low sulfur fuel oil supply. Taiwan also increased fuel oil exports in the fourth quarter from Q3 mainly due to higher refining margins.

** In North Asia, marine fuel 0.5% sulfur bunker supply remains tight in South Korea as only two of four refiners were able to supply the low sulfur grade, while the sole producer of the high sulfur grade GS Caltex is expected to resume HSFO supply from Dec. 20 onwards.

** In Japan, barge congestion and strong winds at the key port of Tokyo Bay is expected to hamper deliveries in the week beginning Dec. 14.

HIGH SULFUR FUEL OIL

** According to brokers' indications and ICE data, morning discussions for the Singapore 380 CST HSFO January-February spread opened Dec. 14 at 25 cents/mt, narrowing from the Dec. 11 assessment of 50 cents/mt, with bids seen at flat against offers at 75 cents/mt.

** The HSFO market is seeing less demand from power utilities in South Asia and the Middle East, barring India.

** Pakistan canceled a tender seeking 180 CST HSFO cargoes for H1 January delivery, while Bangladesh also cut purchase volumes for the 180 CST grade.

** Indian Oil Corp. is due to import 35,000 mt of 180 CST over Dec. 28-29 at three east coast India ports due to lower fuel oil production.

** Demand for 380 CST high sulfur bunkers ended on a strong note in the week ended Dec. 11, as demand is expected to tail off towards the end of the year.