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Asian fuel oil cracks strengthen on weaker crude, healthier fuel demand

Singapore (Platts)--14 Feb 2018 237 am EST/737 GMT


High sulfur fuel oil cracks in Asia are strengthening amid weaker crude prices and healthier demand in the fuel oil and bunker fuel markets, hitting their highest levels since the start of this year.

The front-month February FOB Singapore 180 CST HSFO/Dubai crack swap -- which measures the relative value of the product to crude oil -- rose 73 cents/b day on day to minus 3.12 cents/b Tuesday, S&P Global Platts data showed.

The crack was last assessed higher on December 19, 2017, at minus 2.89 cents/b, Platts data showed.

Meanwhile, the front-month February FOB Singapore 380 CST HSFO/Dubai crack swap rose 69 cents/b day on day to minus 4.10 cents/b Tuesday. The crack was last assessed higher on December 21. 2017, at minus 3.87 cents/b.

HSFO cracks have been on a general downtrend from late June 2017 to early January 2018, before rebounding in recent weeks as crude prices declined amid weaker global risk appetite from sell-offs across equity markets.

The front-month Dubai swap fell to its lowest level this year, assessed at $59.76/b Tuesday.

Slight improvements in the fuel oil and bunker fuel market has also bolstered fuel oil cracks, with bunker fuel sales in Singapore rising 3.2% year on year to a record high of 4.61 million mt in January, data released Tuesday by the Maritime and Port Authority of Singapore showed.

Sales were last higher in January 2017 at 4.46 million mt, MPA data showed. January sales were also up 7.2% from December's 4.3 million mt.

The January sales also marked the first time when the world's largest ship refueling destination saw a record volume of 3.37 million mt in 380 CST bunker sales, up from the previous record high of 3.34 million mt in January 2017.

Last month also saw a record monthly high sales of 980,000 mt of 500 CST HSFO, up significantly from its previous record high of 899,400 mt reached in May 2016.

In addition, persistently strong demand from North Asia for fuel oil as a utility grade over the current severe winter has also been a much-needed boost for the overall market, trade sources said.

South Korea has been importing quite consistently since December as has Japan due to some nuclear station outages, traders said.

South Korea has been importing parcels of around 50,000 mt/month and Japan's volumes have doubled to around 400,000-600,000 mt/month, they added.

--Jeslyn Lerh, jeslyn.lerh@spglobal.com

--Goh Shu Hui, shu.hui.goh@spglobal.com

--Edited by Pankti Mehta, pankti.mehta@spglobal.com




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