VLSFO premium extends climb on steady bunkering demand

The cash premium in Asia's very low sulphur fuel oil (VLSFO) market trended steady to firmer for a seventh consecutive session on Thursday as downstream bunkering demand held firm.

A drop in crude oil prices in recent days encouraged an uptick in bunker buying enquiries, bunker fuel traders said.

The 0.5% VLSFO cash differential (MFO05-SIN-DIF) rose by $2.27 to a premium of $19.77 per tonne on Thursday, while front-month backwardation in the market widened day-on-day at the Asia close (0830 GMT). (LFO05FSGSMc1)

Arbitrage cargoes flowing from the West to the East have been robust in September, though a wider backwardation indicates that supply may tighten slightly in October.

In contrast, the high sulphur fuel oil (HSFO) market continued to hold in discounts amid little recovery in fundamentals.

The 180-cst HSFO cash differential (FO180-SIN-DIF) fell 6 cents to a discount of 20 cents per tonne, while the 380-cst HSFO cash differential (FO380-SIN-DIF) gained 19 cents to a discount of $4.20 per tonne on Thursday.

SINGAPORE INVENTORIES

Residual fuel oil stocks at key trading hub Singapore dropped 5% week-on-week as downstream bunkering demand held steady, while September's average weekly net imports fell month-on-month, official data showed on Thursday.

Onshore fuel oil stocks were at 22.33 million barrels in the week ended Sept. 28, or 3.52 million tonnes, Enterprise Singapore data showed.

OTHER NEWS

- Oil prices retreated slightly in Asia trading hours on Thursday amid a stronger dollar and concerns over the weak economic outlook.

- China may tweak a proposed sharp increase in refined fuel export quotas for this year by extending the plan into next year, as it weighs the benefits to the economy of higher exports against low domestic stocks and operational challenges, four sources told Reuters.

- Indian companies are still buying Russian oil using dollars after Dubai's Mashreq Bank declined to handle payments from at least two refiners in Emirati Dirhams as requested by the supplier, according to three sources familiar with the matter.

- Japan's oil refinery capacity needs to be trimmed further as local demand continues to fall by 2%-3% a year because of a shrinking population, Shunichi Kito, the new president of the Petroleum Association of Japan (PAJ) said on Thursday.

WINDOW TRADES

- 180-cst HSFO: No trade

- 380-cst HSFO: No trade

- 0.5% VLSFO: One trade

ASSESSMENTS