Asia’s spot differential for high sulphur fuel oil (HSFO) has fallen into a discount as of Tuesday, with the market structure shifting from backwardation to contango in response to bearish conditions. According to trade sources, there is an expected abundance of supply coming into July, while demand for bunker fuel has not significantly increased.
The cash differential for Singapore’s 380-cst HSFO was reported at a discount exceeding $2 per metric ton on Tuesday, with trades for prompt loading dates in mid-July reflecting an even larger discount of $4. This downward trend is further underscored by the hi-5 marker, which indicates the premium of very low sulphur fuel oil (VLSFO) over 380-cst HSFO.
The spread for July increased, reaching over $83 per metric ton based on LSEG data, amidst a weak HSFO market and a relatively stable VLSFO environment. In other news, oil prices remained steady on Tuesday as investors considered the potential for OPEC+ to announce an output increase for August during an upcoming meeting alongside trade negotiations.
Saudi Arabia, the leading global oil exporter, may elevate its August crude oil prices for Asian buyers to the highest level seen in four months due to rising spot prices linked to the Iran-Israel conflict and strong summer fuel demand. Furthermore, Britain’s Lindsey oil refinery has initiated insolvency proceedings, putting hundreds of jobs at risk and potentially heightening the UK’s dependence on fuel imports, especially following the recent shutdown of the Grangemouth refinery.
In another significant development, Chevron announced the closure of its Aberdeen office in Scotland, marking the end of its long-standing presence there as part of its restructuring plans. In terms of market activity, there were limited trades with no trades recorded for 180-cst HSFO and 0.5% VLSFO, while one trade was executed for 380-cst HSFO.