Fuel oil crack spread in Singapore has narrowed notably in the past two weeks or so, as market fundamental became firm, C1 found.
The crack spread of current-month fuel oil swaps to Dubai crude settled at minus US$9.25/bbl on Mar 25, narrowing by US$2.46/bbl from Mar 10, C1's data shows.
The market was bolstered up by the earthquake that hit Japan earlier this month. On Mar 14, the first trading day after the quake, Singapore fuel oil market climbed about US$10/mt.
In addition to strong demand for low-sulfur fuel oil in the spot market, Japanese companies bought long positions for April swaps and drove up the crack spread to minus US$6.18/bbl on Mar 16, the narrowest level since the middle of April.
Fewer western arbitrage cargoes for April arrival also supported Singapore fuel oil market fundamental. Such cargoes were estimated to decline about 700,000mt of 17% on month to normal level of 3.6-mil mt.
But Singapore fuel oil market, where high-sulfur resources are the majority, lost upward momentum in late March, as Japan did not slacken the standards for the sulfur content of power plant-consumed fuel oil. The crack spread hovered at around minus US$10/bbl again.
