Fuel oil cracks rally in Asian trade as Singapore stocks fall

London (Quantum Commodity Intelligence) – Global fuel oil cracks moved higher on Thursday after Enterprise Singapore announced an 11% fall in inventories at the bunkering hub – a three week low and its biggest weekly fall in six months.

Marine fuel 0.5% cracks rose to their second highest level in seven sessions to $4.15/b FOB Singapore versus front line Dubai crude, up $0.30/b, based on a 6.9 density conversion by 1630 Singapore time.

Meanwhile, higher sulfur (3.5% 380cst) fuel oil cracks rose to their highest level in five weeks at -$7.10/b, according to Quantum data, while European front month cracks were marked at -$10.30/b, down $0.30/b on the day and the lowest level in two weeks, according to sources.

The rise comes as stocks of fuel oil fell almost 3 million barrels last week to 24 million barrels – the lowest in three weeks and outweighing a 1-million barrel build in stocks in Fujairah.

With additional competition from China for bunkering and a delay to heavy sour Iranian supply, higher sulfur cracks have improved from their month low of -$9/b recently.

The spread between higher sulfur and marine fuel has been narrowing as a result, with the premiums for 0.5% falling from $120/mt a week ago to $113.50/b on Thursday.

However, the market remains structurally weak, with 0.5% cracks around 5% below the average so far this month and higher sulfur faring better – 10% above the average so far this month, according to Quantum data.