Firmer fundamentals are expected to buoy sentiment in the Asian low sulfur fuel oil market in the first trading week of 2021 amid lower arbitrage supply from the West into Singapore and an uptick in demand from North Asian power utilities.
The Asian high sulfur fuel oil market in contrast is expected to see lengthening supply, according to traders, as refineries make incremental increases to production and demand from utilities in South Asia falls in January, with the exception of Sri Lanka.
MARINE FUEL 0.5% SULFUR
** The Singapore Marine Fuel 0.5%S balance-January/February backwardation in mid-morning trade Jan. 4 was stable from the Dec. 31 assessment of $1.50/mt, with bids seen at $1/mt against no offers, Intercontinental Exchange and broker data showed.
** Singapore Marine Fuel 0.5%S is expected to begin the year on a strong note amid declining supply, with the city-state expected to receive about 2 million mt of LSFO from the West in January, down from the 2.5 million-3 million mt estimated for December, S&P Global Platts has reported.
** Traders attributed the lower influx to relatively weak prices in Asia, as well as run cuts at refineries in Europe.
** Demand for LSFO is seen increasing from the power sector in North Asia, with South Korea's decision to shut around 16 of its 60 coal-fired power plants for three months until February to reduce air pollution already prompting an increase in LSFO imports in December.
** Japan is experiencing a cold snap at the start of 2021, and power utilities are boosting LSFO consumption, traders said.
** Sentiment was positive on the near-term direction of the Singapore low sulfur marine fuel 0.5%S bunker market, with buying interest expected for mid-January-deliverable product, traders said.
** Any prompt requirement for product deliverable in the next 3-4 days was likely to come at a higher premium, as most buying requirements for up until the first week of January have been covered and delivery schedules already planned. As such, few suppliers in Singapore would have barge slots available to commit to fresh prompt spot requirements, traders said.
** The premium for Singapore-delivered marine fuel 0.5%S bunker to FOB Singapore marine fuel 0.5%S cargo is expected to remain supported around the mid-teen levels in coming days, traders said.
HIGH SULFUR FUEL OIL
** Discussions for the Singapore high sulfur fuel oil balance-January viscosity spread opened Jan. 4 at $4/mt, higher than the Dec. 31 assessment of $3.90/mt, according to broker indications and ICE data.
** In contrast to the low sulfur market, the HSFO market is expected to see weak fundamentals in the trading week starting Jan. 4 as demand from the power sector in Bangladesh and Pakistan declines, with Bangladesh planning to cut HSFO imports in January and Pakistan canceling HSFO import tenders for the month.
** Sri Lanka however is expected to buck the trend, with the country's sole refiner targeting more imports over the first quarter in preparation for 45 days' maintenance at the Sapugaskanda refinery from mid-February.
** Overall HSFO production rates remain low, but Asian refiners have marginally raised run rates due to a recovery in gasoil and gasoline margins, which is expected to see HSFO supply lengthen.
** The premium of Singapore-delivered high sulfur bunker fuel to the FOB Singapore 380 CST HSFO cargo assessment is likely to be capped at prevailing levels by ample availability. The premium was assessed at $15.18/mt on Dec. 31, Platts data showed.
