The Asian low sulfur marine fuel market is expected to remain bogged down by ample supply and a lack of incremental demand in the near term, traders said.
The Asian high sulfur fuel oil market, however, is expected to garner support at prevailing levels due to incremental demand, especially from the utility sector as a burning fuel for peak summer weather.
MARINE FUEL 0.5% SULFUR
- Singapore marine fuel 0.5% market is expected to remain well-supplied as trading picks up for the second half of July loading cargoes due to ample inventories, traders said.
- Even as market sources estimate that Singapore is expected to receive about 2 million mt of low sulfur fuel oil from the West in July, similar to June, residual fuel to the tune of 9 million mt is said to be stocked up in landed tanks in Singapore and on floating storage in and around Singapore, the lion's share of which is low sulfur material.
- The market structure at the front of the Singapore marine fuel 0.5% swaps curve was reportedly steady at minus $6.50/mt in mid-morning trade June 22, as compared with its June 19 Asian close at minus $6.75/mt, broking sources said.
- On the end-user bunker market side, market participants expect further downward pressure due to oversupply and continued weak demand. Traders estimate that it would take at least two to three months for the current oversupply situation to ease, assuming a pickup in demand, without accounting for the steady inflow of arbitrage cargoes.
- The Singapore-delivered Marine Fuel 0.5%S bunker premium to Singapore Marine Fuel 0.5% cargo, declined from a 14-week high of $36.08/mt on April 30 to $19.71/mt on June 19, Platts data showed.
- In Japan, marine fuel 0.5% bunker prices have been depressed. Thin demand has led traders under pressure to move contractual volumes from refiners within the month to lower prices to attract buying interest. Tokyo Bay delivered marine fuel 0.5% was assessed at $295/mt on June 19, compared with $330/mt in South Korea, $345/mt in Shanghai, and and $351.50/mt in Hong Kong, Platts data showed. Current relatively lower prices in Japan is likely to lead to a demand shift from neighboring ports, traders said.
- In South Korea, a seasonal drop in demand during summer, relative to peak container traffic in winter, has compounded demand destruction from COVID-19, traders said. The differential for marine fuel 0.5%S delivered in Ulsan and Busan over FOB Singapore 10 ppm gasoil assessments fell $15.46/mt week on week to minus $39.74/mt on June 19, Platts data showed.
HIGH SULFUR FUEL OIL
- Further to demand for straight run high sulfur fuel oil cargoes by refiners for use as feedstock over relatively more expensive crude, cracked high sulfur fuel oil has also seen high demand as a burning fuel from the utility sector, especially in Saudi Arabia.
- Reflecting a market that was well-supported, the market structure at the front of the Singapore HSFO swaps curve was reportedly steady at minus $3.75/mt in mid-morning trades July 22, unchanged from its Asian close June 19.
- The HSFO crack spread was also holding strong due to ongoing run cuts. Front month 380 CST HSFO/Dubai crude swaps spread has averaged minus $3.24/b month so far this month as compared with May's average of minus $4.99/b, Platts data showed.
- On the end-user bunker market side, Singapore-delivered 380 CST bunker premium is expected to trade at current levels as demand and supply fundamentals for the grade remains balanced. The Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments was assessed at $15.45/mt on June 19, stabilizing from a 13-week low of $12.24/mt on April 6, Platts data showed.
- Elsewhere, tight supply of high sulfur bunker fuel in Japan has lifted premiums out of negative territory to a one-month high on June 19. Tokyo-Bay delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo was assessed up 51% week on week at $16.45/mt on June 19, Platts data showed.
