The market structure for very low sulphur fuel oil (VLSFO) weakened further in Asia on Wednesday, with backwardation spreads narrowing, while more spot offers also emerged.

Some sellers were still trying to clear a supply overhang following a month of heavy incoming supplies, trade sources said, while bunker demand for VLSFO retained a tepid tone.
Singapore’s VLSFO inter-month spread for balance-April and May was pegged at a backwardation of 70 cents a metric ton at Wednesday’s Asia close, compared with about $1.50 on Tuesday. Narrowing backwardation reflects a weaker market structure.

The product’s cash differential also eased further on Wednesday after flipping from premium to discount in the previous session, while refining cracks fell to premiums of about $11 a barrel.

High sulphur fuel oil (HSFO) also weakened, with 180-cst and 380-cst cash differentials FO380-SIN-DIF widening in discounts on Wednesday. Meanwhile, 380-cst HSFO cracks dipped below discounts of $11.50 a barrel.

INVENTORY DATA

– Fujairah heavy fuel inventories fell 6.3% to 9.35 million barrels (1.47 million tons) in the week to April 1, hitting four-week lows, FOIZ data published by S&P Global Commodity Insights showed.

OTHER NEWS

– Oil prices extended gains on Wednesday as investors eyed concerns around crude and fuel supplies, following Ukrainian attacks on Russian refineries and the potential for a widening of the Israel-Hamas war to more directly include Iran.

– Taiwan’s Formosa Petrochemical has restarted operations at the port at its Mailiao oil refinery after closing it as a precautionary measure following a powerful earthquake, a company spokesperson said on Wednesday.

– Nigeria’s Dangote oil refinery started supplying petroleum products to the local market on Tuesday, a company executive and fuel marketing associations said, a major step in the country’s quest for energy independence.

– Mexico’s state energy company Pemex requested its trading unit to cancel up to 436,000 barrels per day of crude exports this month as it gets ready to process domestic oil at the new Dos Bocas refinery, an internal document seen by Reuters shows.

WINDOW TRADES O/AS

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

Source: Reuters reported by Jeslyn Lerh and edited by Mrigank Dhaniwala