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FEATURE: Thailand's higher April fuel oil exports add to well-supplied regional market

Singapore — Above-average residual fuel spot exports by Thailand in April is likely to further weigh on an already well-supplied Asian market, traders said.

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The country's spot residual fuel exports for April are expected to touch 130,000 mt, up from the typical average of 60,000-70,000 mt/month that Thailand had shipped since January -- mostly to Singapore -- and higher than the approximately 100,000 mt of spot volumes the country exported in March, Thailand's refinery sources have said.

"When you consider that Singapore receives about 2.5 million-3 million mt of [low sulfur] fuel oil cargo each month from the West, an extra 50,000 mt doesn't seem like much, but it still points to the health of the domestic market," said a Singapore-based fuel oil trader.

Weak domestic demand is mostly attributed for Thai refiners having to focus on exports, said a company source at the country's largest refiner PTT.

The fact that a refiner like ThaiOil, which typically has a spot cargo to export only once every quarter or so, has more to sell, shows that [domestic] bunker demand has dropped 20%-30% from the usual 90,000-100,000 mt/month, a Singapore-based bunker trader said.

ThaiOil has so far sold 18,000 mt of 380 CST high sulfur fuel oil cargo for April 7-9 loading, and another 23,000 mt of 0.5% sulfur fuel oil for April 26-28 loading, market sources said.

Apart from ThaiOil, PTT is offering its second LSFO cargo for export in April, comprising 35,000-50,000 mt, depending on how much is available if bunker sales do not pick up, according to the PTT source.

Refiners within the region have in recent months swayed toward maximizing LSFO output due to a relatively lower margin to produce cleaner transportation fuels, especially diesel.

The Asian marine fuel 0.5%S crack spread has remained robust in 2021 since a drop in arbitrage volumes to Singapore in the first two months of 2020, averaging $13.15/b over the first quarter, compared with $9.64/b in fourth quarter 2020, S&P Global Platts data showed.

An incremental volume of fuel oil that has come to the market from within the region, especially over the course of the last two months, is in addition to the Western arbitrage fuel oil arrivals, which market sources have said has been ample, if not abundant, for March and April.

Market sources estimate Western arbitrage fuel oil to the tune of near 3 million mt to arrive East in April -- more or less similar to the volume that is said to have landed in March.

Spot trading activity in the Singapore marine fuel 0.5%S cargo market has been lackluster in the recent past, with premiums trading in a narrow range due to a lack of demand in a well-supplied market.

The cash differential for Singapore marine fuel 0.5%S cargo over the Mean of Platts Singapore marine fuel 0.5%S assessments has averaged 83 cents/mt in the week ended April 10, up slightly from the previous week's average of 48 cents/mt, Platts data showed.