Refining margins for high sulphur fuel oil (HSFO) logged a sharp weekly drop as of Friday, with the market showing signs of a downward correction following its recent rally.

Cracks for July 380-cst HSFO FO380DUBCKMc1 fell to discounts of $6.50 a barrel on Friday, sliding nearly 70% from last week, based on LSEG data at 0830 GMT.

The market hit nine-month highs in end-May amid a drop in supplies, though cargo arrivals of various origins are expected to pick up in the latter half of June, trade sources said.

Spot premiums have also softened this week, with 380-cst cash differential dipping towards $12 a metric ton on Friday as more offers emerged.

Benchmarks for very low sulphur fuel oil (VLSFO) were also under pressure this week, with cracks LFO05SGDUBCMc1 sliding below $8 a barrel, logging declines of about 30% from last week, while cash premiums also traded lower at $2 a ton on Friday.

Inventories have risen at key trade hubs, including Singapore and Fujairah this week, latest data showed.

INVENTORY DATA

– ARA inventories STK-FO-ARA rose 2.5% to 1.59 million tons in the week to June 6, data from Dutch consultancy Insights Global showed.

OTHER NEWS

– Oil prices ticked higher on Friday as reassurances from OPEC+ members Saudi Arabia and Russia indicated readiness to pause or reverse output agreements, but markets were headed for their third straight weekly loss.
– China’s crude oil imports fell 8.7% from a year earlier, official data showed, as refiners scaled back purchases amid heavy plant overhauls and subdued profit margins.
– Pertamina Patra Niaga, the trading arm of Indonesia’s state-owned energy major, is seeking another 2.8 million barrels of gasoil for June spot delivery, as troubles at the Balikpapan refinery persist, two sources with knowledge of the matter said.
– Saudi Arabia is poised to raise more than $11.2 billion from its secondary offering of oil giant Aramco’s shares, after pricing them towards the lower end of a price range at 27.25 riyals ($7.27), people familiar with the matter told Reuters.

WINDOW TRADES O/AS

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

Source: Reuters reported by Jeslyn Lerh and edited by Sohini Goswami