Petrotahlil - The Asian marine fuel market faces a mixed outlook in the week ahead with high sulfur fuel oil likely to receive continued support from tight demand-supply fundamentals, while low sulfur Marine Fuel 0.5% is seen under pressure amid tepid demand and high inventories.
Trading activity in the low sulfur marine fuel markets is going through a lull as a sharp correction in differentials has pushed some sellers to the sidelines on hopes of a recovery. Bids and offers for Marine Fuel 0.5%S remain wide apart as some sellers are reluctant to offer in the current market where discounts have plunged to $41/mt below Singapore Gasoil 10 ppm quotes, from discounts in the mid-$20s/mt in early-May, traders said.
MARINE FUEL 0.5% SULFUR
- June 8 morning activity on the Singapore Marine Fuel 0.5% sulfur July/August spread remained rangebound from the week ended June 5 with bids at minus $6/mt finding no offers, ICE futures data showed.
- On the end-user side, market participants expect further downward pressure due to ample supply and weak demand. Singapore-delivered Marine Fuel 0.5%S bunker premium to Singapore Marine Fuel 0.5% cargo fell to $13.98/mt on June 5 after touching a 12-week high of $36.08/mt on April 30, Platts data showed.
- In the Middle Eastern bunkering hub of Fujairah, demand for the IMO-compliant marine fuel is expected to remain subdued in the near term, traders said. Recent inquiries have still mostly been for lower-than-usual parcel size of below 1,000 mt due to cautious buying sentiment, traders said.
HIGH SULFUR FUEL OIL
- HSFO's rally looks set to continue on stronger demand, led by refiners buying more high sulfur straight run fuel oil for feedstock after Saudi Arabia sharply raised its crude official selling prices and other Middle East producers are expected to follow suit.
- On the back of a recovery in demand in the week ended June 5, the Singapore 380 CST cash differential rose to minus $6.42/mt on June 5, the highest since April 28.
- Saudi Arabia's and Bangladesh's increasing HSFO purchases are providing support to the HSFO market, with the Singapore-delivered 380 CST bunker premium expected to hover at current levels on stable demand, market sources said.
- Northeast Asia premiums are expected to continue rising with South Korea's sole supplier, GS Caltex, low on high sulfur bunker fuel inventory. The Busan/Ulsan 380 CST high sulfur bunker differential to Singapore high sulfur cargo assessments dropped $20.37/mt week on week to $60.46/mt on June 5.
- Demand for bunker fuel in Japan is expected to pick up this month following the lifting of the nationwide state of emergency on May 25. With factories resuming production, shipments will increase. Tokyo Bay delivered marine fuel 0.5% differential to Singapore 10 ppm gasoil cargo assessments finished the week on June 5 at minus $27.50/mt, down $3.85/mt week on week, Platts data showed.
-Tight supply for high sulfur bunker fuel in South Korea is expected to support premiums, with sole supplier GS Caltex low on inventory.
- Singapore-delivered 380 CST bunker premium is expected to hover at current levels on stable demand, market sources said. The Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments was assessed at $17.46/mt on June 5, stabilizing from a 12-week low of $12.24/mt on April 6, Platts data showed.