Singapore refining margins for benchmark 180-cst fuel oil against Dubai crude on Monday rose to their narrowest discount in more than four years amid lower supplies and firm demand, despite recent efforts to boost yields.
The improved margin follows winter demand for power generation, lower exports from key suppliers like Russia and Venezuela and general maintenance outages elsewhere, industry sources said.
“The weak Dubai (crude oil price) this month is helping with everything. Winter has gripped China and even Seoul,” said Energy Aspects oil analyst Nevyn Nah.
The November fuel oil refining margins futures swap to Dubai crude has risen by $3.53 a barrel since the start of the fourth quarter to minus $1.41 a barrel on Nov. 7, its lowest discount since the second quarter of 2012.
Fuel oil margins have gained 70 percent this quarter, making it the top performer in Singapore’s refining sector.
That comes despite some refiners’ recent efforts to increase fuel oil yields to meet summer demand.
“Refineries have already been boosting fuel oil yields since June including the Japanese and even the Indians,” said Nah.
Fuel oil, which is a residual product of the refining process, tends to trade at a discount to crude oil because overall supplies usually outstrip demand.
Since 2004, Singapore fuel oil margins have been positive for only 3 days, between Jan. 25-27, 2012.
Source: Reuters (Reporting by Roslan Khasawneh; Editing by Joseph Radford)