Traders have said some storage costs of unsold oil is being offset, especially with weak bunker demand in Singapore, as the Asian low sulfur fuel oil market June/July contango widens, according to bunker suppliers.
The Asian high sulfur fuel oil market was witnessing contrasting indications of demand for power generation from the Middle East, led by Saudi Arabia, while heavy showers, rising infections and falling demand in Sri Lanka cast a bearish sentiment.
MF 0.5% Sulfur
** Discussions for the Singapore 0.5%S marine fuel June/July contango May 17 were largely stable from the May 14 assessment of minus $2.05, with bids seen at minus $3/mt against offers at $1.75/mt, Intercontinental Exchange data showed.
** Although downstream bunker sales have continued to be lackluster since April, fuel oil traders see the recent widening contango in the Singapore 0.5%S marine fuel market providing some respite.
** “It will at least cover storage costs if it continues to widen,” said a trader in Singapore, referring to the June/July contango, which widened to a nine-month high of $2.05/mt May 14, according to S&P Global Platts data.
** In north Asia, the Japanese bunker market is expected to remain tight until the end of May as the country’s largest refiner ENEOS suspended accepting fresh orders for Tokyo Bay and Osaka Bay cargoes. The Sendai refinery was shut after an earthquake on May 1.
** The shutdown disrupted the refinery’s supply of blending components of low sulfur fuel oil to refineries in Tokyo Bay and Sakai.
** ENEOS plans to restart operations at Sendai in the second half of May, although supply is unlikely to recover before end-May. “It takes time to produce the components, transfer and blend them. Stocks at Tokyo Bay are declining at this moment,” said a bunker trader based in Tokyo.
** Supply in Zhoushan, China, is expected to remain ample even as demand weakens, with rough weather conditions bringing bunkering operations at outer anchorages to a halt.
** The spread between Singapore 10 ppm sulfur gasoil and delivered Zhoushan marine fuel bunker prices widened to $57.88/mt, the widest since August 21, 2019, when it was at $59.75/mt, Platts data showed.
** Morning discussions for the June Singapore high sulfur fuel oil viscosity spread opened May 17 stable from the May 14 assessment at $5.50/mt, with bids at $5.25/mt against offers at $5.70/mt, according to brokers’ indications and ICE data.
** Indications of more regional procurement of HSFO emerged after Aramco Trading won a recent sell tender from Kuwait Petroleum Corp. offering up to 100,000 mt of maximum 4% sulfur and 380 CST fuel oil loading May 15-16.
** The cargo adds to Saudi Arabia’s term contract imports of HSFO from Europe, as well as recent spot purchases from the US to meet its burgeoning power sector demand, market traders said.
** In contrast, Sri Lanka, a regular outlet for high sulfur and low sulfur fuel oil in South Asia, will not be importing any cargo for June-delivery as heavy rains see the country rely more on hydroelectric power for the rest of the second quarter.
** Additionally, falling demand amid rising local coronavirus cases and increased restrictions on movement will ensure that domestic fuel oil production from the country’s sole refinery is sufficient to meet power generation demand, according to a source at Ceylon Petroleum Corp.