VLSFO cash premium nears 2-year high on tight outlook

November 12, 2021 at 07:01 am

SINGAPORE (Reuters) - Lifted by a jump in demand for spot cargoes on Friday, the cash premium for Asia's 0.5% very low-sulphur fuel oil (VLSFO) extended gains for a fifth straight session to climb to a near two-year high.

The VLSFO cash premium rose to $8 a tonne to Singapore quotes on Friday, its highest since February 2020 when new global rules capped the sulphur content in marine fuels at 0.5%.

Bullish sentiment in the VLSFO market has in recent weeks been fuelled by firm demand, reduced refinery output and tightening supplies of blendstock materials as refiners maximise output of gasoline and gasoil.

The global diesel market is tight, and it could get even tighter, data firm Vortexa said in a note on Friday.

"Refinery supplies are struggling to keep up with rising demand, leading to a draw on inventories across key storage hubs with limited buffer for any demand upside or supply disruptions," Vortexa said.

Meanwhile, residual fuel inventories at the Amsterdam-Rotterdam-Antwerp (ARA) storage hub inched away from a near two-year low in the previous week, official data showed.

Weekly residual fuel inventories at the Fujairah hub jumped, while those in Singapore edged lower.

INVENTORIES

Fuel oil stocks in the ARA refining and storage rose 5%, or 53,000 tonnes, to 1.07 million tonnes in the week ended Nov. 11, data from Dutch consultancy Insights Global (IG) showed.

Compared with last year, however, the inventories at the ARA hub were 21% lower and were below the five-year seasonal average of 1.19 million tonnes.

In the Fujairah hub, fuel oil stockpiles jumped 42% from the previous week to a three-month high of 10.5 million barrels, or 1.65 million tonnes, in the week to Nov. 8.

In Singapore, fuel oil inventories fell 3% to a three-week low of 21.75 million barrels, or 3.43 million tonnes, as weekly net import volumes dropped.

WINDOW TRADES

Cargo trades in the Singapore trading window included 80,000 tonnes of VLSFO along with 40,000 tonnes of high-sulphur fuel oil (HSFO).

The combined deal volumes on Friday were the highest since early September.

Please click on [O/AS] for more details.

TENDERS

Pakistan's PSO left an import tender for up to 180,000 tonnes of fuel oil for delivery over the second-half of November unawarded.

In a similar tender for first-half of November imports, PSO lifted just one HSFO cargo amid ample domestic supplies after a jump in summer imports.

ISSUER GRADE: VOLUME: DELIVERY DATE: RESULT

Pakistan/PSO B: 180cst HSFO 3.5% S max (Port Qasim) 65KT Nov 16-30 BB Energy/ MOPAG 180 $58.44/t, CFR (unawarded)

B: 180cst HSFO 3.5% S max (Port Qasim) 65KT Nov 16-30 Vitol/ MOPAG 180 $62.88/t, CFR (unawarded)

B: 170cst LSFO 0.95% S max (Karachi) 50KT Nov 16-30 BB Energy/ MOPAG 180 $118.44/t, CFR (unawarded)

For more information, please see [FUEL/TENDA].