Asian margins for 0.5% marine fuel hit record high on thin supply

23 Nov 2021

Quantum Commodity Intelligence - Refining margins for marine fuel 0.5% in the Asian hub of Singapore have hit the highest level since the pandemic began, rising to $6/b versus nearby Brent with the December swaps market becoming increasingly tight and trading at a record premium to January swaps.

Physical cargoes of marine fuel oil for loading in the next 15-30 days out of Singapore were assessed at $583.50/mt FOB on Tuesday, midway between a bid and offer of $583-584.50/mt.

That left the crack using a 6.9 density basis up $0.25/b on the day to $6.01/b – the highest since the pandemic began and following a six-week bull run.

Rising bunker demand at the hub has been behind the move, with other ports in East Asia fetching premiums to that of Singapore, particularly in China.

That’s despite the bunker-cargo spread in Singapore trading at above $20/mt at points over the past few weeks.

On Tuesday, bunkers were pegged at $21.50/mt above cargoes.

Imports

According to market sources, imports into the hub are expected to be low in December, with deliveries expected to reach only around 1.5-2 million mt, down around 1 million mt versus November.

That, on top of stocks falling to a six-week low last week, has led prices to spike and caused the premium of 0.5% over HSFO to rise to a record $163/mt earlier this month.

On Tuesday, the Hi5 spread was marked at $149/mt.

The market remains relatively tight until March, with the Dec/Jan spread hitting a high of $11.50/mt on Tuesday and the Jan/Feb at $7/mt.

A week ago, those spreads were $8.50/mt and $6.50/mt.

The strong backwardation, alongside cracks in Europe, closed the arb from northwest Europe, with the December ARA barge versus the January Singapore cargo marked at $22/mt by 1630 Singapore time, down $3.50/mt in a week.