Fuel oil cracks rose to touch new highs on Thursday after extending gains for a fourth consecutive session, fuelled by bullish fundamentals and falling crude oil prices. This came as Singapore onshore fuel oil inventories rose to a near two-month high. However, it was largely ignored by traders since the inventory build was a result of floating storage being discharged into onshore tanks.
CRACKS – The July spread between the 180-centistoke fuel oil swap and Dubai crude rose to a premium of 59 cents a barrel, up from 27 cents a barrel in the previous session, Reuters data showed. – Prior to Wednesday, the last time the residual fuel has been at a premium to Dubai crude was in January 2012 and before that in July 2003. – The July margin for FOB Rotterdam barge fuel oil to Brent crude on the Intercontinental Exchange (ICE) also extended gains, narrowing its discount to around $3.70 a barrel by 1630 Singapore time (0830 GMT). – Analysts and traders expect fuel oil margins to remain elevated throughout the summer when demand for the fuel used in power generation peaks. – The steady gains in fuel oil margins have made the residual fuel among the best performing oil products so far this year. – Margins of Singapore fuel oil to Dubai crude have soared by nearly 125 percent this year compared to gasoline margins which contracted by around 17 percent and diesel margins that shrank by about 7 percent during the same time.
SINGAPORE INVENTORIES – Singapore onshore fuel oil inventories rose to a 7-week high of 3.48 million tonnes in the week to June 21, up 8 percent or 168,000 tonnes from the previous week, official data showed. – This came despite a 60 percent drop in Singapore net imports to a 6-week low of 0.52 million tonnes. – At least one VLCC storing fuel oil, the Humanity, discharged her cargo over the past week, adding as much as 300,000 tonnes to onshore inventories. – Traders estimate there are a further three fully-laden VLCCs parked around Singapore for short-term fuel oil storage.
WINDOW TRADES – One cargo trade reported in the Platts window, totalling 20,000 tonnes of 380-cst fuel oil. – A total of 1.08 million tonnes of fuel oil have traded in the window since the start of June, against 1.94 million tonnes in May.
ASSESSMENTS FUEL OIL CASH ($/T) ASIA CLOSE Change % Change Prev
RIC Close Cargo – 180cst 283.41 -3.67 -1.28 287.08 Diff – 180cst 1.60 -0.03 -1.84 1.63
Cargo – 380cst 277.64 -3.42 -1.22 281.06 Diff – 380cst 2.09 -0.13 -5.86 2.22
Bunker 282.75 -2.25 -0.79 285.00 (Ex-wharf)- 380cst
Bunker (Ex-wharf) 5.11 1.17 29.70 3.94
Source: Reuters (; Editing by Biju Dwarakanath)