Fuel round up: Asia HSFO price surge continues on cutter stock shortage

Quantum Commodity Intelligence - A shortage of distillate cutter stocks pushed high sulfur fuel oil cash prices to fresh highs this week, combining with growing utility demand and tight supply in Singapore after chlorinate-tainted fuel was found in the bunkering hub.

A shortage of Russian distillate supply has been affecting the cutter stock used to lower residual fuel viscosity, ramping up HSFO prices.

That is having knock-on effects for buyers as utility importers in South Asia, who were already struggling to cover supply for the summer months due to elevated LNG prices, are looking to cover seasonal demand.

Already-tight background supply of residual fuels in Singapore is also playing its part, driven primarily by a chlorinate-contaminated batch of high sulfur fuel in the bunkering hub.

Over the week, global stocks data again leant to the downside, with ARA supplies at a three-year low and Singapore a three-month low, outweighing a slight build seen in Fujairah.

Those trends have combined to lift Asian HSFO cash premiums higher still, with buyers in the Platts window far outweighing sellers through the week and leaving 180 CST at $28.25/mt above nearby swaps and 380 CST at $20.75/mt.

Moves in the paper market saw backwardation grow further as the front end of the market edged higher, pushing the 180 CST Apr22/May22 spread another $3.50/mt higher to $53.25/mt. For 380 CST, the market went the other way, narrowing $4.75/mt to $33.75/mt.

That gave an outright 1% increase at $686.75/mt for 180 CST and down 1% at $642.50/mt for 380 CST, with the viscosity spread surging to an all-time high of $54.50/mt, up from an already elevated $34.25/mt a week ago.

Margins

The refining margin for HSFO ramped further ahead into unfamiliar positive territory, with the 180 CST crack to Brent up another $3.50/b over the week to $8.21/b while 380 CST was up almost $1/b to -$0.37/b.

In Europe, 380 CST barges went in the opposite direction, falling 8% to $550.50/mt by Thursday night while cracks were down almost $2/b to -$12.65/b.

In terms of arbs, the 380 CST east-west spread jumped 34% to a healthy $61/mt, although the steep curve is unlikely to move barrels.

For marine fuel 0.5% sulfur, things were again far quieter than in HSFO.

The Platts window saw several nearby cargoes changing hands over the week, although Quantum's differential assessment was broadly steady over the week at a $22.75/mt FOB Singapore premium to swaps.

That left the Asia outright price down 1% over the week at $794.25/mt, while spot cracks to Brent edged 3% higher to +$13.56/b. In Europe, prices were down 8% to $811.25/mt as the crack retreated from $11.34/b to +$9.07/b.