Asia’s cash differential for high sulphur fuel oil (HSFO) jumped sharply on Tuesday as strong bids emerged, though headwinds loomed as supply loadings did not appear to have tightened much for August.
The 380-cst HSFO cash differential FO380-SIN-DIF was pegged at a premium of $18.33 per metric ton on Tuesday, as a flurry of bids and trades emerged at higher values day-on-day.
Sentiment for HSFO remains firm amid the OPEC+ supply cuts to medium and heavy sour supply, said analysts.
“OPEC+ cuts and seasonal field maintenance elsewhere cut HSFO supply, while rising global refinery complexity has lifted VGO and resid upgrading demand,” said analysts from BofA Global Research in a note this week.
“Also, discounted Russian fuel oil that struggled to clear in 2022 is now finding more buyers in the Middle East, where it is being used for further upgrading or for power,” the analysts added.
However, headwinds still loom for HSFO as buying appetite from Chinese independent refiners have retreated slightly, while the wider Asia market does not appear to have tightened significantly, trade sources said.
The front-month refining crack spread for 380-cst HSFO FO380DUBCKMc1 retreated to a discount of $6.54 a barrel at 0830 GMT, after hitting more than one-year highs the day before.
Meanwhile, the very-low sulphur fuel oil (VLSFO) market also firmed in tandem with the wider strength, despite steady supplies.
The cash differential for 0.5% VLSFO MFO05-SIN-DIF was pegged at a premium of $4 a metric ton, while front-month margin LFO05SGDUBCMc1 climbed to a premium of $10.15 a barrel.
In tenders, South Korea’s S-Oil had sold slurry for loading between end August and early September.
Source: Reuters reported by Jeslyn Lerh and edited by Sonia Cheema
