Asia fuel oil visco spread grows as gas price spike boosts demand
Quantum Commodity Intelligence - The spread between 180cst and 380cst fuel oils widened to a three-week high in Asia Thursday, boosted by rising global gas prices as utility companies scramble to cover a shortfall in supply with residual fuels.
The viscosity spread – the difference between 180cst and 380cst cargoes in Singapore – was up another $7.26/mt on Thursday to a three-week high of $26.64/mt, Quantum data showed.
There were new deals booked in the 180cst market on Thursday at $2.50-$3/mt over the paper curve as natural gas prices continue to rise around the world, with European TTF futures and Asian LNG benchmarks pushing new all-time highs this week.
That has seen demand for lower viscosity residual fuels outlasting typical seasonal demand, with broker data showing multiple outstanding tenders in the fuel oil market, with importers – particularly in South Asia – looking to cover spot positions with imports of low viscosity fuel oil cargoes.
While unable to meet all uncovered demand, for those power companies with the capacity to switch to residual fuel consumption and in jurisdictions where it can be used in power generation, gas-to-oil switching could mitigate some of the worst effects of the looming energy crunch.
A similar trend is impacting the gasoil market, where the prospect of gas-to-oil switching in Europe has lifted global refining margins for middle distillates.
The spot crack for 10ppm diesel cargoes versus Brent in Singapore was up another $5.59/b on Thursday to near a two-month high at +$56.48/b, Quantum data showed.
