The very low sulphur fuel oil (VLSFO) market in Asia has shown signs of softening over the past week, while the high sulphur fuel oil (HSFO) market has remained resilient. Specifically, Singapore’s VLSFO cash differential has declined further, nearing a premium of $10 per metric ton on Friday. This decline is attributed to weakened bunker premiums and lukewarm buying activity.
Additionally, cracks in VLSFO recorded weekly declines based on data from LSEG. In contrast, the cash differential for 380-cst HSFO concluded the week with premiums, experiencing some volatility as it neared parity with cargo quotes. Cracks for HSFO remained stable or even improved compared to the previous week, holding steady near recent highs.
However, trade sources indicate that the Asian market is still facing challenges due to sluggish demand and sufficient inventories in the spot market. In terms of inventory data, fuel oil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region dropped by 1.3% week-on-week, totaling 1.10 million tons as of May 22, according to Dutch consultancy Insights Global. In other market developments, oil prices fell for the fourth consecutive session on Friday, marking their first weekly decline in three weeks.
This drop is primarily influenced by renewed supply concerns stemming from a potential OPEC+ output increase in July. Furthermore, spot premiums for Murban crude have plummeted to six-month lows due to increased supply from the United Arab Emirates, which is ramping up production in response to OPEC+ initiatives. In infrastructure news, Hungary’s MOL and state-owned MVM have announced plans to charter tankers to transport up to 160,000 metric tons of crude oil annually from Azerbaijan.
Meanwhile, Mexico’s Pemex, the most indebted energy company globally, is reportedly considering a restructuring of parts of its operations to reduce costs. On the trading front, there have been no trades for 180-cst and 380-cst HSFO this week, while one trade was recorded for 0.5% VLSFO.