HSFO cash premiums surge to 9-month highs, VLSFO firms

Cash premiums for cargoes of Asia’s high-sulphur fuel oil (HSFO) extended gains on Friday, ending the week at multi-month highs amid limited supply and firm demand from utilities and refiners.

Cash premiums 180-cst HSFO hit a more than nine-month high of $5.30 a tonne to Singapore quotes, while premiums for cargoes of 380-cst HSFO climbed to a nine-month high of $3.50 a tonne.

At the start of the week, 180-cst HSFO premiums were at $1.28 a tonne and $1.50 a tonne for 380-cst HSFO cargoes.

The VLSFO market also nudged up on Friday as lower arbitrage arrivals into Asia this month are expected to weigh on supplies.

Residual fuel inventories at the Amsterdam-Rotterdam-Antwerp (ARA) storage hub rose to a five-week high this week, while those in the Singapore and Fujairah hubs fell, official data showed.

Fuel oil stocks in the ARA refining and storage rose by 171,000 tonnes to 1.24 million tonnes in the week ended Aug. 5, data from Dutch consultancy Insights Global (IG) showed.

Compared with last year, the inventories at the ARA hub were 1% lower, but were above the five-year seasonal average of 1.18 million tonnes.

In Singapore, fuel oil inventories fell 2% to a more than four-month low of 22.44 million barrels, or 3.53 million tonnes, as net import volumes remained low.

In the Fujairah hub, fuel oil stockpiles were 8% lower to a near four-month low of 10.32 million barrels, or 1.62 million tonnes amid limited imports into the Fujairah hub, as well as higher exports to Pakistan.

Gunvor sold two 40,000 tonne 0.5% very low-sulphur fuel oil (VLSFO) cargoes to Shell. Glencore sold a 20,000 tonne 180-cst high-sulphur fuel oil (HSFO) cargo to Vitol.

Indian state refiner Hindustan Petroleum Corp’s import of high sulphur crude oil will rise after expansion of its Vizag plant to 300,000 barrels per day along with bottom upgradation units by end-2022, its chairman MK Surana said on Thursday.

The company sees expansion of its 166,000 barrels per day Vizag refinery to 300,000 bpd by March next year while bottom upgradation project would be completed by end-2022.

“There will be no change in crude diet of Mumbai refinery after expansion. Vizag refinery will have the flexibility to process 100% high sulphur crude oil after commissioning of bottom upgradation units,” Surana said in the analysts call. Surana said upgradation will raise Vizag refinery’s distillate yield to 90% and a double digit gross refining margins. China’s fuel demand is on track to hit record highs this year on a rebound in car sales and booming domestic air travel, even as a resurgence of COVID cases slows movement in some cities in the near term, analysts say.