The cash premium for very-low sulphur fuel oil (VLSFO) eased slightly on Tuesday, while market backwardation continued to soften.

The balance-Oct/Nov timespread was pegged at a backwardation of $14.80 a metric ton at Tuesday’s Asia close, narrowing versus $18.25 a ton the previous day.

The market backwardation has weakened compared to when it hit four-month highs last week.

Reflecting this, Singapore’s VLSFO cash premium eased to $13 a ton over Singapore quotes on Tuesday, while refining crack for November closed lower at $8.40 a barrel.

“We do not expect Asia’s VLSFO strength to continue as pressure will come from the ramp up of the third and final Al Zour train at the end of October,” said consultancy FGE in a note on Tuesday.

FGE added that winter gasoline weakness should also increase the availability of low sulphur bunker components at the global level.

Meanwhile, the 380-cst high sulphur fuel oil (HSFO) cash differential was little changed at a discount $1.95 a ton, while refining crack slipped to a discount of $14.48 a barrel.

INCOMING SUPPLIES

Fuel oil supplies to Asia are pegged at about 4.5 million tons for October, edging lower compared with September, as per calculations based on LSEG Oil Research data this week.

However, supply inflows from the West are expected to breach volumes from the previous month, with 3 million tons slated for arrival this month, the data showed.

OTHER NEWS

– Oil prices eased on Tuesday after rallying more than 4% in the previous session, with traders cautious as they watched for potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas.

– Venezuela and the U.S. have progressed in talks that could provide sanctions relief to Caracas, by allowing at least one additional foreign oil firm to take Venezuelan crude oil for debt repayment if President Nicolas Maduro resumes negotiations with the opposition in Mexico, five sources said.

– Saudi Aramco has notified at least four North Asian buyers that it will supply full contractual volumes of crude oil in November, sources with knowledge of the matter said on Tuesday, as the Kingdom maintained its output policy.

– Chevron and unions representing workers at its two Australian liquefied natural gas facilities will meet for talks on Wednesday, after the oil and gas major asked the industrial arbitrator to help close a deal as workers threaten to restart strikes.

WINDOW TRADES O/AS

– 180-cst HSFO: No trade
– 380-cst HSFO: No trade
– 0.5% VLSFO: Two trades

Source: Reuters reported by Jeslyn Lerh and edited by Shailesh Kuber