22-06-2017

Asia Fuel Oil-Cracks extend gains to 5-1/2 year high, flip to premium

Fuel

Lifted by tighter supplies and firm demand since the start of the year, refining margins of Singapore 180-cst fuel oil to Dubai crude in Asia flipped to a premium on Wednesday for the first time since January 2012.

FUEL OIL CRACKS
Fuel oil supplies declined after OPEC members focused their crude cuts on grades that yield the most fuel oil. – Investments into refinery upgrades in places such as India and Russia also cut supply.

Robust fuel oil consumption this year also seen rising in the next months as demand from utilities rises to meet cooling requirements.

A recent rout in crude prices also supportive for refining margins.

“Fuel oil prices are known to be sticky and cracks usually get a boost when crude prices fall,” Nevyn Nah at Energy Aspects said. – The spread between the 180-centistoke fuel oil swap and Dubai crude for July was a premium of 27 cents a barrel, Reuters data showed.

This is the first time the residual fuel has been at a premium to Dubai since January 2012. Prior to that, the margin was last at a premium in 2003.

The margin averaged a discount of $3.09 in 2017 and averaged minus $5.37 last year. – Broker sources pegged the July barge crack to Brent crude at minus $4 a barrel on Wednesday.

One broker said this is the highest level for the front-month crack he had seen. WINDOW TRADES – Four cargo trades were reported in the Platts window, totalling 20,000 tonnes of 180-cst fuel oil and another 60,000 tonnes of 380-cst fuel oil.

A total of 1.06 million tonnes of fuel oil have traded in the window since the start of June, against 1.94 million tonnes in May.

INVENTORIES
In the United Arab Emirates, the Fujairah Oil Industry Zone (FOIZ) fuel oil inventories were up 5 percent in the week to June 12 at 11.704 million barrels after rising 555,000 barrels, data via S&P Global Platts showed.

Fuel oil inventories in the Fujairah hub are now at their lowest since the beginning of April.

Traders said bunker fuel sales in Fujairah may have come under pressure recently since the Emirate issued a ban Qatari-linked vessels from entering its ports.

On Monday, Qatar Petroleum said it made available a vessel-borne fuelling facility for all ships lifting any Qatari seaborne imports or exports.

Source: Reuters

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