Asia’s hi-5 fuel oil spread crunched to its narrowest in over five years, based on LSEG data, as the market for very low sulphur fuel oil (VLSFO) continued to weaken, while high sulphur fuel oil (HSFO) strengthened.

The hi-5, which reflects the premium of VLSFO over 380-HSFO, fell below $76 a metric ton for the February contract at the Friday close, LSEG data showed. The spread was last narrower in December 2020. (FO05-380SGMc1)

HSFO has retained its strength ever since sanctions clouded the supply outlook. The prompt-months backwardation for both 180-cst and 380-cst grades widened above $10 a ton on Friday, compared to about $8 before the holidays.

In contrast, VLSFO has pared due to high inventories and an adequately supplied market in the short term. Spot VLSFO traded softer on Friday for loading dates between late February and early March, based on data from industry sources.

INVENTORY DATA

– Fujairah heavy fuel inventories (FUJHD04) rose 19.4% to 8.67 million barrels (1.37 million tons) in the week to Jan. 27, showed FOIZ data published by S&P Global Commodity Insights.
– ARA fuel oil inventories (STK-FO-ARA) fell 1.7% at 1.39 million tons in the week to Jan. 30, based on data from Dutch consultancy Insights Global.

OTHER NEWS

– Oil prices were steady on Friday but on course for a weekly decline as markets wait to see if U.S. President Donald Trump follows through on his threat to impose tariffs on Mexico and Canada this weekend.
– U.S. President Donald Trump on Thursday said he would soon decide whether to exclude Canadian and Mexican oil imports from the 25% tariffs that he has vowed to impose on Saturday on the countries’ products.
– Seven companies have been selected to participate in a tender for Bulgaria’s biggest refinery owned by Russia’s Lukoil, Prime Minister Rosen Zhelyazkov has told parliament.
– Malaysian state-owned energy firm Petroliam Nasional Berhad will look to boost the country’s oil and gas output through key projects over the next three years, it said in its activity outlook report.

WINDOW TRADES

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

Source: Reuters