High sulphur fuel oil (HSFO) spot premiums continued their downward trend on Tuesday, and market participants are closely monitoring incoming supplies. This month, total fuel oil arrivals in Asia are projected to exceed 7 million tons, an increase from around 4.5 million to 5 million tons last month, according to ship-tracking data.
The rise in supply is largely attributed to increased arrivals from all major supplying regions. In recent trading sessions, cash premiums for 380-cst HSFO have fallen, driven by softened offers for April loading dates.
Although the market retains some strength for the March trading cycle, overall demand has weakened. Notably, purchases from the Chinese refining sector have slowed, and demand from the Asia bunkering sector remains lackluster.
In contrast, the market for very low sulphur fuel oil (VLSFO) has remained stable, with limited new catalysts affecting prices. Spot differentials continue to reflect discounts, with VLSFO cracks for April closing around $7.60 per barrel, a decrease from the previous day, while 380-cst HSFO cracks closed at discounts of approximately $2.45 per barrel.
Additionally, India’s HPCL has announced an offer for HSFO loading in April. From the refining sector, U.S. oil refiners are expected to have approximately 1.1 million barrels per day of capacity offline in the week ending March 21, resulting in a reduction of available refining capacity by 409,000 bpd, according to IIR Energy.
In broader news, oil prices saw an increase of over 1% on Tuesday, reaching their highest levels this month, buoyed by instability in the Middle East and China’s announcement of more economic stimulus measures. A ship transporting Russian crude passed through a Chinese port after transferring from three smaller tankers under U.S. sanctions, signaling ongoing efforts to sustain oil shipments from Moscow.
Venezuela’s PDVSA is preparing for operational scenarios to continue oil production and exports in its joint venture with Chevron amidst an expiring operating license. Lastly, a U.S. military-contracted tanker carrying jet fuel was struck by a cargo ship off England’s northeast coast, resulting in damage to only one of its tanks.