Second Day of Gains for VLSFO Market
Asia’s very low sulphur fuel oil (VLSFO) market saw its second consecutive day of recovery on Wednesday, while the Hi-5 fuel oil spread reached a more than five-week high.
Hi-5 Spread Reaches New Heights
The July Hi-5 spread, which represents the price difference between VLSFO and 380-cst high sulphur fuel oil (HSFO), closed at $103.50 per metric ton, according to LSEG data. The spread is significant for bunkering and scrubber economics, as a wider Hi-5 spread incentivizes ships equipped with scrubbers to use more HSFO due to the higher cost of VLSFO.
Market Dynamics and Recent Trends
In late May, the Hi-5 spread narrowed to its lowest point since December 2020, falling below $80 per ton due to a stronger HSFO market. However, the spread has since widened from these multi-year lows. This change was driven by a rebound in VLSFO benchmarks this week, attributed to stronger bids from major market players, according to trade sources.
Singapore’s VLSFO Premium and Cracks
Singapore’s VLSFO cash premium increased to $5.40 per ton on Wednesday, extending gains from a three-week high in the previous session. Additionally, VLSFO cracks rose to premiums of $10.40 per barrel. In contrast, high-sulphur benchmarks weakened, with the cash premium for 380-cst HSFO falling to $4.50 per ton and cracks holding at discounts of about $6 per barrel.
Recent Tenders
In tender news, South Korea’s S-Oil recently sold slurry and light cycle oil for July loading dates, based on trade sources and shipping records. The refiner offered 22,000 tons of slurry for loading between July 23 and 27, along with 300,000 barrels of light cycle oil for loading between July 24 and 28.
Inventory Data
Fujairah’s heavy fuel inventories rose by 5.6% to 9.27 million barrels (1.46 million tons) in the week leading up to June 24, according to FOIZ data published by S&P Global Commodity Insights.
Other Industry News
Oil prices steadied on Wednesday, remaining close to the highest levels in almost two months. This stability was driven by forecasts of an eventual inventory drawdown in the third quarter and ongoing risks related to the Middle East conflict.
In Venezuela, the state oil company PDVSA has begun using tankers that navigate off radar to supply its closest political ally, Cuba. This shift comes as the fleet of state-owned vessels that historically covered the route has dwindled, according to documents and ship monitoring services.
PetroChina International America, a unit of PetroChina, has agreed to pay a fine and forfeiture totaling $14.5 million for violations of U.S. export law, as announced by the Justice Department.
In Indonesia, a former chief executive of the state energy firm Pertamina has been sentenced to nine years in jail for graft in a case related to a long-term contract to procure liquefied natural gas from a unit of U.S. company Cheniere Energy.
Window Trades
180-cst HSFO: No trade
380-cst HSFO: One trade
0.5% VLSFO: Three trades
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