31-07-2018

Singapore 380 CST HSFO swap spreads jump to fresh year-to-date highs on low stocks

Singapore 380 CST high sulfur fuel oil paper timespreads and crack spreads against Middle Eastern crude benchmarks jumped to fresh year-to-date highs Friday after Singapore’s residue stocks plunged to a six and a half year low.

The Singapore 380 CST HSFO August/September spread stood at $9.85/mt at 4:30 pm Singapore time (0830 GMT) Friday. It was also last higher on May 29, 2015, at $13.25/mt, data from S&P Global Platts showed.

The August 380 CST HSFO swap crack spread against the same-month Dubai crude swaps rose to minus $1.601/b Friday, the highest since July 24 last year, when it came in at minus $1.474/b, Platts data showed.

Singapore’s commercial stockpile of residues fell to a six and a half year low of 16.196 million barrels in the week ended July 25, IE Singapore data released late Thursday showed.

The stockpile dropped 17.5% from a week earlier, and it was last lower on January 18, 2012, when the inventory was at 15.334 million barrels.

Although traders had expected the stocks to have declined in the week to July 25, the draw was bigger than expected, a fuel oil trader said.

The supply tightness has been supporting the market.

The volume of arbitraged fuel oil arriving in Singapore in July from Europe and the US was expected at around 3.5 million mt, against typical monthly volumes of about 5 million mt. For August, Singapore is expected to receive only 3 million mt,traders said.

On the flipside, demand is getting stronger as Japan and South Korea have started buying both HSFO and low sulfur fuel oil for their power plants.

CHINA’S TEAPOT REFINERS SUSPEND BUYING STRAIGHT-RUN FUEL OIL

Meanwhile, many Chinese independent refiners have stopped buying straight-run fuel oil cargoes as feedstock as the fuel oil crack spread has risen, making it less competitive compared with crude oil, industry sources said.

These Chinese independent refiners, except Rongsheng Petrochemicals, are no longer buying straight-run fuel oil, the sources said.

Rongsheng Petrochemicals, based in the Zhejiang Province, needs to buy straight-run fuel oil as feedstock for its fluid catalytic cracker because the company does not have a crude distillation unit, industry sources said. Rongsheng buys about 200,000 mt/month of straight-run fuel oil, the sources said.

China’s Shandong independent refineries, the major buyers of straight-run fuel oil, imported a total of around 150,000 mt of straight-run fuel oil as feedstock over April-May, while most recently Luqing Petrochemical bought a 46,000-mt cargo for early-August delivery from Singapore for an FCC feedstock, industry sources said.

These Shandong independent refineries have imported a total of around 300,000 mt of straight-run fuel oil so far this year.

In light of this weak demand, straight-run fuel oil premiums have declined.

UAE’s Abu Dhabi National Oil Co, or ADNOC, sold 90,000 mt of straight-fuel oil with 2.0% sulfur and with maximum 100 CST viscosity for loading in the second-half of August at a premium of $25-$30/mt to Mean of Platts Singapore 180 CST high sulfur fuel oil assessments, FOB.

ADNOC last sold a similar cargo for loading in July at a premium of around $40/mt to MOPS 180 CST HSFO assessments, on an FOB basis, Platts reported previously.

Source: Platts

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