Asia’s fuel oil complex strengthened on Monday amid an apparent tightness of on-specification supplies, boosting fuel oil cracks, prompt month time spreads and ex-wharf premiums to multi-month highs.
Singapore refining margins for benchmark 180-cst fuel oil moved to their narrowest discount to Dubai crude in more than four years amid firm regional demand for power generation, lower exports from key suppliers such as Russia and Venezuela as well as general maintenance outages elsewhere.
The November 180-cst fuel oil refining margin to Dubai crude rose 3 cents on Monday from the previous session to minus $1.38 a barrel, its smallest discount since the second quarter of 2012.
Fuel oil margins have gained more than 70 percent this quarter making them the top performer in Singapore’s refining sector.
The Nov/Dec time spreads for the 380-cst fuel also rose to the highest level in nearly 17 months, lifted by ongoing cutter stock constraints, industry sources said.
The balance of Nov/Dec time spreads for 380-cst fuel were 50 cents higher at $2.75 a tonne above Singapore quotes.
The last time the prompt month 380-cst fuel oil market structure was as backwardated was in June 2015 during the so-called June bull play which saw record volumes of fuel trade and sharp price volatility.
The lack of suppliers in the break-bulk ex-wharf market, which is often seen as a gauge of market fundamentals, also helped boost cash premiums.
Ex-wharf premiums for the 380-cst fuel rose 77 cents to $4.28 a tonne to Singapore quotes, the highest premium since Jan. 26.
Some industry participants, however, said the recent strength in the fuel oil complex would ease soon as incoming arbitrage flows replenish supplies.
“There’s no shortage of oil coming, it’s just a short-term problem of lack of cutter,” said a Singapore-based trader.
SINGAPORE CASH TRADES: Three cash deals reported. For further details, please see
FUEL OIL CASH ($/T) ASIA CLOSE Change % Change Prev RIC Close Cargo - 180cst 270.85 -0.39 -0.14 271.24 FO180-SIN Diff - 180cst 2.57 -0.12 -4.46 2.69 FO180-SIN-DIF Cargo - 380cst 264.22 0.48 0.18 263.74 FO380-SIN Diff - 380cst 2.92 0.10 3.55 2.82 FO380-SIN-DIF Bunker (Ex-wharf)- 380cst 268.50 1.25 0.47 267.25 BK380-B-SIN Bunker (Ex-wharf) Premium 4.28 0.77 21.94 3.51
Source: Reuters (Editing by David Clarke)