Asia residual fuel market: Key market indicators for June 21-25

　　While the bunker demand for marine fuel 0.5%S in the Asia-Pacific market remains lukewarm overall, the lifting of 14-day mandatory quarantine for crews on vessels at Hong Kong for bunkers-only calls is expected to raise demand marginally in the port city, Singapore-based traders said.

　　”There was an increase [in shipments of fuel oil] at the end of May, and I think we’ll see some cargoes from Singapore pulled to Hong Kong in H2 June as well,” said a trader here.Meanwhile, in the high sulfur fuel oil market, the increase in demand for straight-run fuel oil as a refinery feedstock in East Asia has also seen competing demand for the grade as a blending component for cargoes destined for the power generation market in Kuwait and Pakistan, according to market traders based in Fujairah.

　　Singapore** Discussions for the Singapore Marine Fuel 0.5%S July/August spread June 21 fell to flat compared with the June 18 assessment of 20 cents/mt, according to Intercontinental Exchange data showed.

　　** In Singapore, marine fuel 0.5%S bunker supply shows no signs of tightening despite a drawdown of 10.92% from the previous week to 23.977 million barrels, or 3.78 million mt.

　　** Demand for Singapore-delivered marine fuel 0.5%S remains lukewarm at best, as bunker suppliers have been seeing a “steady inflow of inquiries” but still missing expectations of stronger demand that sufficiently shores up the premiums of delivered marine fuel 0.%S over FOB Singapore cargo of the same grade.

　　** Coupled with the rising flat prices, barging spreads have fallen short of the differential between delivered and ex-wharf basis required to cover operational expenditures.

　　** An average of $8-$9/mt barging spread should cover the increasing operational costs driven up by strengthening flat prices, sources said.

　　** S&P Global Platts data showed that the differential between Singapore-delivered marine fuel 0.5%S and ex-wharf basis, rose to $5/mt on June 18, up from a whole-month average of $2.80/mt in May.

　　** Bunker suppliers in Singapore, however, said there is no upside for spot prices of delivered marine fuel 0.5%S in the near term, especially as delivered bunkers at Zhoushan and Fujairah continue trading at a discount to Singapore-delivered prices.

　　North Asia** In North Asia, Hong Kong marine fuel 0.5%S bunker supply is expected to tighten with a spike in demand after the government dropped its requirement that ships calling at its ports without loading or discharging cargo complete 14 days’ quarantine, from June 15 under certain conditions.

　　** Market sources are, however, confident of supply in the short-term remaining sufficient, expecting a time delay between an increase in demand, and additional supply availability due to the time taken to import and ship cargo.

　　** The Zhoushan market is expected to be well supplied as local refiners keep producing low sulfur fuel oil. A bunker supplier said “[bunker demand] is down from May,” because of restrictions for ships entering the Zhoushan port. Bunkering operations at Shanghai and Zhoushan are still allowed but there are some restrictions especially for ships coming from India. Zhoushan bunker prices have been lower than Singapore since June 15.

　　Fujairah/Middle East** According to ICE data and brokers’ numbers, morning discussions for the July high sulfur fuel oil viscosity spread opened June 21 at $6.75/mt, lower than the June 18 assessment at $6.85/mt.

　　** An upswing in high sulfur fuel oil to meet power generation demand for the third quarter from Kuwait and Pakistan has led to a shortage of non-sanctioned straight-run fuel oil, according to traders based in the Middle East.

　　** “Technically, there’s still enough HSFO blend to meet demand, however, if you’re looking for a product that has absolutely no sanctioned material blended into it, then you’re going to have to pay a higher price,” said a trader in the UAE.

　　** Meanwhile, in the low sulfur fuel oil market in the Middle East, supplies of low sulfur fuel oil in Fujairah shifted into a more balanced configuration, following an oversupply in May.

　　**Despite an increase in marine fuel 0.5%S bunker demand from dry bulk vessels since June, it could not offset weak demand from the tanker segment, which the market was hoping to recover by the third quarter of 2021, sources said.

　　** In a bid to secure fixings amid the tepid demand, Fujairah-based bunker supplier said that the competitive spot offers eroded the premiums of Fujairah-delivered marine fuel 0.5%S over FOB Singapore cargo.