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Asia residual fuels: Key market indicators for Oct 18-22

Asian marine fuel 0.5%S markets kicked off the Oct. 18-22 trading week on a firm note as Asian refiners are shifting to produce more middle distillates due to higher crack spreads, while Asian high sulfur fuel oil is likely to be supported due to high LNG prices even though the peak summer season in the Middle East and South Asia is over.

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Marine fuel 0.5%S

**Soaring gasoil and jet fuel values are driving Asian refiners to produce more middle distillates, resulting in a cut in fuel oil output. The November swap crack spread between 10 ppm gasoil and Dubai crude soared to $15.66/b, the highest since Jan. 3, 2020, while the spread between jet fuel and Dubai rose to $13.52/b Oct. 6, the highest since Jan. 8, 2020, before it slipped to $13.42/b Oct. 15, Platts data showed. Asian refineries are expected to raise run rates, but they will not increase low sulfur fuel oil production, market sources said. The spread between marine fuel 0.5%S and Dubai crude was $6.73/b (conversion rate: mt=6.8 barrel) on Oct. 15.

**Barge availability in Singapore is expected to remain tight this week, following the emergence of a COVID-19 cluster at Universal Terminal last week. Suppliers are filling orders done between late-September and early-October when demand picked up following a month of "mostly lackluster" sales in September, sources said.

**As a result, premiums for Singapore-delivered marine fuel 0.5%S over benchmark FOB Singapore marine fuel 0.5%S cargo assessments averaged $9.26/mt during the week ended Oct. 15, up from the average $8.46/mt the week prior, Platts data showed.

**In North Asia, bunkering operations at the outer anchorages of Zhoushan and Shanghai are expected to remain halted over the next week as bad weather is expected to continue at Zhoushan, a bunker supplier said. According to the Chinese Meteorological Administration, strong cold winds and rain are expected to hit the province of Zhejiang, where Shanghai and Zhoushan ports are at, with temperatures estimated to drop by nearly 12-14 degree Celsius.

**Bunkering activity at Hong Kong have resumed post Cyclone Kompasu, with demand expected to pick up in the coming weeks.

HSFO

**High LNG prices are still supporting HSFO prices. Asian LNG benchmark Platts JKM was assessed at $36.598/MMBtu Oct. 15, equivalent to $1,511/mt, according to Platts data.

**Electricity demand from the Middle East and South Asia declined from the peak summer season, while fuel oil demand could stay strong as Pakistan failed to buy spot LNG cargoes.

**State-run Pakistan LNG Ltd. failed to receive any bids for an LNG tender of eight cargoes for delivery over December-January, as suppliers balked at a new provision that allowed the importer to decide on the validity of the prices for over two weeks compared with just three days previously.

**After the peak summer season, Singapore has been experiencing a gradual easing of tight inventories, which is expected to soften Singapore-delivered 380 CST HSFO premiums, with more availability in H2 October and November, sources said.

**The premium for Singapore-delivered 380 CST HSFO against the FOB Singapore 380 CST HSFO cargo assessments averaged $18.42/mt during the week ended Oct. 15, down from the previous week's average of $21.79/mt, Platts data showed.