Asia Fuel Oil: HSFO Margins Weaken

Refining margins for 180-cst high sulphur fuel oil remained weak on Friday despite an uptick in cash differentials over recent trading sessions.

The front-month crack was at a discount of $20.60 per barrel at the Asia close (0830 GMT) on Friday, declining further compared to an average discount of $16.59 per barrel over last month, based on Refinitiv data. Fuel oil demand for power generation is expected to soften further as peak summer has retreated in the Middle East, while plentiful supplies weigh on the market.

Spot trading activity was overall thin on Friday, with just a sole trade emerging for 180-cst HSFO. The 180-cst HSFO cash differential rose $3.08 to a premium of $8.01 per tonne amid the presence of a strong bid, climbing for a third straight day. Meanwhile, the 380-cst HSFO cash differential continued to hover in small single digits over Singapore quotes this week, dipping 16 cents to a premium of $2.27 per tonne.

The cash differential for 0.5% very low sulphur fuel oil slid to its lowest in 14 months, falling 63 cents to a premium of 78 cents per tonne on Friday. Fuel oil inventories in the ARA refining and storage hub fell 10% to 1.14 million tonnes in the week ended Sept. 1, latest data from Dutch consultancy Insights Global showed.

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