The FOB premium for Singaporean 180CST fuel oil settled at around US$1/mt in early July, down by about US$3/mt from early June, C1's data showed.
The decline was primarily because of weaker demand from China, said a derivative trader with a Singapore-based investment bank. Sinopec’s refinery maintenance will peak in July and its purchase volume of crude from the Middle East was estimated to gain 5% month-on-month, the trader explained. This will make more crude available to independent refineries and reduce their demand for fuel oil, he said.
The CFR premiums of straight-run fuel oil for July delivery to China have lost US$5-10/mt from the previous month, indicating weakening demand, he added.
In addition, Brightoil turned from a large buyer of 180CST fuel oil in May to a seller in July in Singapore, which suggested abundant supply of cutter stock and declining viscosity spread, said some trading sources.
Over 400,000mt of spot 180CST fuel oil that Brightoil bought in May will be sold to Singapore or used as cutter stock in the local market, according to a source with Brightoil.
It seems that peaking power demand in summer has not brought much support to the market of 180CST fuel oil. Japanese power plants are likely to require about 100,000 more metric tons fuel oil for power generation in July, said a Japanese fuel oil trader, but part of the demand for imported resources will be replace by increased domestic production. The three refineries that were damaged by the earthquake in March will resume operation this month, the trader explained.
