June arrivals of low sulfur fuel oil are expected to be higher than May and add to current levels in storage, as volumes from the Americas increase, according to Singapore-based fuel oil traders. Traders expect some end-May arrival of low sulfur fuel oil cargo in Singapore to slip into June.
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Register NowThe expectations of increased supply comes amid weak spreads between the cargo and the delivered Singapore market.
A weaker Asian high sulfur fuel oil, or HSFO, crack spread is unlikely to deter refiners from reducing production of HSFO, particularly in the subcontinent, partly to meet bunker demand at most ports. Expectations of more demand towards the end of the second quarter are also incentivizing refiners to maintain output at current levels.
Marine Fuel 0.5% Sulfur
** Discussions for the Singapore Marine Fuel 0.5%S June/July contango widened May 24 from the May 21 assessment of minus $2.01/mt, with bids seen at minus $2.50/mt against offers at $2/mt, Intercontinental Exchange data showed.
** June-arrival low sulfur fuel oil, or LSFO, arbitrage volumes are expected to see an increase to approximately 2.2 million mt from May's levels of approximately 1.8 million mt, with arrivals from Brazil set to increase, according to traders surveyed by S&P Global Platts.
** Market sources are cautiously optimistic that a widening Singapore 10 ppm gasoil Marine Fuel 0.5%S spread could boost demand for Singapore-delivered Marine Fuel 0.5%S.
** "The [Asian gasoil-marine fuel] spread would spur shipowners to substitute gasoil purchases with Marine Fuel 0.5%S, especially as the product is traded on a Marine Fuel 0.5%S pricing basis in Singapore unlike some other ports around North Asia," a Singapore-based trader said.
** However, high inventories in Singapore pose a downside risk to this positivity. "Suppliers were heard offering at low prices to offload bunker fuel inventories, and the market would be exposed to the price war until inventories are balanced," a Singapore-based bunker supplier said.
** In North Asia, the Marine Fuel 0.5%S bunker market is expected to remain well supplied amid high inventories currently, bunker suppliers said.
** Despite delivered Zhoushan Marine Fuel 0.5% bunker prices rising above that of Singapore in the week ended May 21, supply remains ample in China's largest bunkering port, bunker suppliers based there said.
** After nearly one-and-a-half months of the spread between Zhoushan and Singapore being negative, Zhoushan delivered prices started to become less competitive as local Chinese suppliers achieved target volumes for May, market sources said.
** On the other hand, some bunker suppliers suspended their sales earlier in May because of low market prices, which raised stocks in the port, a bunker supplier said.
** In Tokyo Bay, supply is likely to increase in June after the country's largest refiner ENEOS restarted operations at its Sendai refinery, which supplies low sulfur fuel oil components to ENEOS' refineries in Tokyo Bay and Sakai refinery.
** The Sendai refinery was forced to shut on May 1 due to an earthquake, which led to a drop in the company's LSFO stocks, market sources said. ENEOS subsequently suspended accepting fresh orders mid-May.
High sulfur fuel oil
** According to the ICE data, morning discussions for the June Singapore HSFO viscosity spread opened May 24 stable from the May 21 assessment at $5.65/mt, with bids at $5.25/mt against offers at $6/mt.
** Despite high inventory levels of HSFO in and around Singapore, steady bunker demand was not able to mitigate the Singapore 380 CST crack spread sinking to an 18-month low of minus $8.77/b May 18, according to Platts data.
** At least two HSFO producers in India indicated their intention to maintain current levels of production. "We still have to cater to bunker requirements, and traditionally by the end of Q2, we start to see a pick up in demand from the Middle East," one of the producers said.
** Supply availability of high sulfur bunker fuel in the North Asian ports of Japan and South Korea is currently sufficient, according to bunker suppliers in those markets.
** In Fujairah, bunker suppliers also indicated low offers to stay competitive amid an oversupply of Marine Fuel 0.5%S and 380 CST HSFO.
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