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Asia residual fuel market - Key market indicators this week

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Asia residual fuel market - Key market indicators this week

Singapore — Asian low sulfur marine fuel market was expected to trade steady to firm as the market goes into trading second-half December loading product, traders said.

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Optimistic sentiment from the end-user marine fuel 0.5% bunker market, which traditionally stays firm going towards the end of the year, was likely to bode well for the upstream marine fuel 0.5%S cargo market too, said traders.

Further, buyers who were on the sidelines in the recent days due to a spike in flat price and on expectations that crude prices will correct lower, were likely to come in and meet their requirements, especially before the year-end holiday period, traders based in the city-state said.

MARINE FUEL 0.5% SULFUR

** A move by refiners and suppliers to reduce inventory going into the financial year end was likely to squeeze marine fuel 0.5%S bunker availability as spot trading for December delivery gains pace, said traders.

** Demand on the other hand, was expected to see an uptick before the market trading activity slows down prior to year-end holidays.

** In the North Asian bunkering hubs though, the trading week was expected to start on a slow note as buyers were likely to wait for pricing cues after the OPEC members' meeting on Nov. 30 to decide on crude production cuts for 2021.

** In Japan, demand so far in November was said to be particularly good, because some vessels apparently took enough bunker to complete two back-to- back voyages so as to not have to come to the spot market during the year-end holidays. The premium for Tokyo Bay-delivered marine fuel 0.5%S bunker over FOB Singapore marine fuel 0.5%S cargo, has surged to average $17.05/mt so far in November as compared to October average of $7.09/mt.

** In Hong Kong, which is a major container vessel bunkering hub, demand has recently seen an uptick due to the traditional busy season for container shipping. Hong Kong has, in the recent months, seen a slide in demand due to a 14-day quarantine measure for vessels making bunker-only calls which has been in place since end-July. The differential for Hong Kong-delivered marine fuel 0.5%S bunker over FOB Singapore marine fuel 0.5%S cargo, has flipped to average a premium of $9.48/mt so far in November as compared to a discount of $3.45/mt in October.

** With a similar volume of Western cargoes expected to arrive in Asia in December compared to November, supply fundamentals are likely to remain unchanged. Traders said about 2.5 million mt of low sulfur fuel oil is likely to reach Singapore in December.

** Prompt marine fuel 0.5%S crack, or the spread between December marine fuel 0.5%S swap to same month Dubai crude swap, was trading 26 cents/b higher from it's Nov. 27 Asian close of $10.02/b in mid-morning trades.

HIGH SULFUR FUEL OIL

** According to brokers' indications and ICE data, morning discussions for the Singapore 380 CST high sulfur fuel oil December/January timespread opened Nov. 30 wider at $2.50/mt from the Nov. 27 assessment of $2.25/mt, with bids seen at $2.25/mt against offers at $3/mt.

** With high sulfur fuel oil losing potential demand in December from South Asia, margins have started to weaken, commented fuel oil traders in Singapore.

** Pakistan State Oil canceled its last buy tender seeking a maximum of 260,000 mt of 120 CST HSFO for delivery over H2 December as the country secured enough LNG, industry sources said.

** Sources in the Bangladesh market also stated that the country will cut its December HSFO purchase volumes by 25% on the month to 150,000 mt.

** Demand for straight-run fuel oil has dropped as Singapore 180 CST HSFO values have risen, and high sulfur crude oil cracks spreads from middle distillates have shrunk.

Straight-run fuel oil prices are typically linked to 180 CST HSFO prices, therefore, when 180 CST values rise, straight-run fuel oil loses its competitiveness.

**On the high sulfur fuel oil side, the Singapore delivered 380 CST high sulfur bunker differentials were expected to trade steady to slightly firmer in the ensuing days, with vessel-owners stocking up on inventory ahead of the holiday season. Consequently, the Singapore-delivered 380 CST bunker fuel premium to FOB Singapore 380 CST HSFO cargo is expected to trade in the high-teens as trading picks up for December delivery product, said traders.

**Singapore-delivered 380 CST bunker fuel premium has averaged $19.51/mt thus far in the fourth quarter as compared to $17.85/mt in the previous quarter.