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Asian fuel oil cracks strengthen on weaker crude, healthier fuel demand

Singapore — High sulfur fuel oil cracks in Asia are strengthening amid weaker crudeprices and healthier demand in the fuel oil and bunker fuel markets, hittingtheir highest levels since the start of this year.

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The front-month February FOB Singapore 180 CST HSFO/Dubai crack swap --which measures the relative value of the product to crude oil -- rose 73cents/b day on day to minus 3.12 cents/b Tuesday, S&P Global Platts datashowed.

The crack was last assessed higher on December 19, 2017, at minus 2.89cents/b, Platts data showed.

Meanwhile, the front-month February FOB Singapore 380 CST HSFO/Dubaicrack swap rose 69 cents/b day on day to minus 4.10 cents/b Tuesday. The crackwas last assessed higher on December 21. 2017, at minus 3.87 cents/b.

HSFO cracks have been on a general downtrend from late June 2017 to earlyJanuary 2018, before rebounding in recent weeks as crude prices declined amidweaker global risk appetite from sell-offs across equity markets.

The front-month Dubai swap fell to its lowest level this year, assessedat $59.76/b Tuesday.

Slight improvements in the fuel oil and bunker fuel market has alsobolstered fuel oil cracks, with bunker fuel sales in Singapore rising 3.2%year on year to a record high of 4.61 million mt in January, data releasedTuesday by the Maritime and Port Authority of Singapore showed.

Sales were last higher in January 2017 at 4.46 million mt, MPA datashowed. January sales were also up 7.2% from December's 4.3 million mt.

The January sales also marked the first time when the world's largestship refueling destination saw a record volume of 3.37 million mt in 380 CSTbunker sales, up from the previous record high of 3.34 million mt in January2017.

Last month also saw a record monthly high sales of 980,000 mt of 500 CSTHSFO, up significantly from its previous record high of 899,400 mt reached inMay 2016.

In addition, persistently strong demand from North Asia for fuel oil as autility grade over the current severe winter has also been a much-needed boostfor the overall market, trade sources said.

South Korea has been importing quite consistently since December as hasJapan due to some nuclear station outages, traders said.

South Korea has been importing parcels of around 50,000 mt/month andJapan's volumes have doubled to around 400,000-600,000 mt/month, they added.

--Jeslyn Lerh, jeslyn.lerh@spglobal.com

--Goh Shu Hui, shu.hui.goh@spglobal.com

--Edited by Pankti Mehta, pankti.mehta@spglobal.com