Growing supply tightness in the Singapore fuel oil market, coupled with weakening crude prices, pushed Singapore high sulfur fuel oil cracks to all-time highs Tuesday.
The front-month December Singapore 180 CST HSFO swap crack against Dubai swaps hit an all-time of $4.61/b as of 4:30 pm Singapore time (0830 GMT) Tuesday, S&P Global Platts data showed. Similarly, the December 380 CST swap crack against Dubai swaps also hit an all-time of $3.94/b, Platts data showed.
Singapore 380 CST HSFO December/January spread has also widened to a three-year high of $11.80/mt Tuesday, Platts data showed. The front-month time spread was last higher on May 29, 2015, when it was assessed at $13.25/mt.
The HSFO market in Singapore has been faced with supply tightness over the past few months, and expectations of the tightness extending into December pushed cracks to an all-time high, market sources said.
Residue stocks in Singapore have been low due to a lack of cargo replenishment.
Singapore’s residue stocks fell 1.6% from a week earlier to 15.821 million barrels in the week ended November 14, latest data from Enterprise Singapore showed. The stocks were also 32.8% lower than the average of 23.537 million barrels in 2017, the data showed.
Enterprise Singapore describes total stocks of heavy distillates as residues, which include cracked, straight-run fuel oil and low sulfur waxy residue. The data only counts stocks in onshore tanks.
Singapore imported 6.04 million mt of fuel oil in the five weeks ended October 31, data from Enterprise Singapore showed, and the country exported 1.72 million mt of fuel oil in the same period.
Traders expect Singapore to receive around 6 million mt from the West of Suez and the Persian Gulf in November. “That is not enough to maintain or build the stocks,” a trader based in Singapore said.
For December, arbitrage supplies from Europe and the US are expected at around 4 million mt, down from 4 million-4.5 million mt for November.
The impact of the reduced arbitrage flow was also seen in the 3.5% Rotterdam barge crack value — a measure of the openness of the arbitrage to Singapore from Northwest Europe — which hit a record high on Tuesday.
The December 3.5% Rotterdam barge crack value against Brent swaps hit a record high of minus $4.19/b as of 4:30 pm Singapore time on Tuesday, Platts data showed.
Cargo activity from Rotterdam to the East has reduced over the last couple of weeks after 1.18 million mt departed in October compared with 390,000 mt so far in November.
FALLING CRUDE PRICES
Meanwhile, falling crude prices also kept crack levels supported, market sources said.
The front-month ICE January Brent crude oil futures contract fell more than $20/b in about a month as investors remained concerned over weak demand and oversupply.
Crude oil inventories in the US have been rising for eight straight weeks and analysts expect the build to continue in the coming weeks. Also, Russia produced a record 11.4 million b/d of crude to help compensate for the lack of Iranian barrels on account of the US sanctions.
ICE January Brent crude futures settled at a nine-month low of $62.53/b Tuesday. As of 0612 GMT Wednesday, the contract is at $63.17/b.
In tandem with the plunge in Brent crude prices, Singapore December 180 CST HSFO swap crack against Brent swaps hit an all-time of $3.09/b on Tuesday, while the 380 CST HSFO crack against Brent swap also stood at a record high of $2.42/b on Tuesday, Platts data showed.
OPEC and its allies are now discussing about the possibility of a production cut to help stabilize prices, a decision for which is set to be taken at the next OPEC/non-OPEC meeting at Vienna on December 6.