Asia Fuel Oil-Market complex edges higher but supply overhang persists

Prices in Asia’s fuel oil market complex edged higher on Wednesday on increased buying interest and falling crude oil prices, but gains were capped by a persistent overhang in global supplies of the industrial fuel. Stronger buying interest in the middle and back-end of the Platts window helped narrow cash discounts of the 380-cst fuel after a total of 110,000 tonnes of the fuel exchanged hands through five deals, industry sources said.

Traders said the improved buying interest towards the back-end of the pricing window, which corresponds to around mid-April and later, could point to the gradual narrowing of supplies then as replenishments ease after weeks of limited arbitrage opportunities. This comes as global inventory data showed stocks of residual fuels remained at elevated levels. In the United Arab Emirates, the Fujairah Oil Industry Zone on Wednesday reported an 11 percent increase in heavy distillates and residue inventories in the week to March 20, data via S&P Global Platts showed. Fuel oil inventories in the storage hub jumped 1.06 million barrels (almost 158,000 tonnes) to a total of 10.92 million barrels (or 1.63 million tonnes), the highest level since records began in January, the data showed.

This follows storage data in the previous week that showed fuel oil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) hub jumped 20 percent in the week to March 16, their highest since records began in 1995, while stocks of the industrial fuel in Singapore edged only 3 percent away from an eight-month high in the week to March 15. In the paper markets, elevated trade activity in the near-term market structure of the 380-cst fuel narrowed its contango on expectations of an easing supply overhang. The ICE 380-cst April/May time spread was trading at a contango of 75 cents a tonne by 1730 Singapore time (0930 GMT), while the May/June contract was trading at parity to one another after also posting gains of 25 cents a tonne from the previous session, sources said.

Meanwhile, falling crude oil prices helped nudge Singapore fuel oil refining margins higher on Wednesday to their highest since March 13. Singapore’s April 180-cst fuel oil narrowed its discount to Dubai crude after gaining 39 cents a barrel from the previous session to minus $3.76 a barrel, while margins of the April 180-cst fuel against Brent crude also rose 35 cents a barrel from Tuesday’s close to minus $5.33 a barrel.
Source: Reuters