Markets retreat; VLSFO shows signs of easing tightness

Asia spot fuel oil premiums dipped on Monday, with market sources saying that the supply tightness in very low sulphur fuel oil (VLSFO) had eased slightly compared to early last week, even as cracks moved higher from the previous session.

The product traded at weaker premiums into the later dates of July, though the market structure largely held in a steady backwardation for prompt months.

High sulphur fuel oil (HSFO) also traded softer into late July, with supply set to firm amid a gradual recovery in Middle Eastern trade flows.

More regional supply tenders were underway for July, according to market sources.

Thailand's PTT offered another LSFO cargo for loading from Map Ta Phut between Jul 28-30, via a tender that closed on Monday. This came on top of a previous cargo for mid-July loading.

Separately, India's HPCL offered more HSFO cargoes for loading from Vizag in July, via a tender that closes on Tuesday. The two cargoes are scheduled to load between July 19-21 and July 25-27 respectively.

Bucking the trend in spot markets, cracks moved higher on Monday in volatile trade. The VLSFO crack (LFO05SGBRTCMc1) ended Monday's session at a premium near $17.14 a barrel, while 380-cst HSFO crack (FO380BRTCKMc1) closed at a discount of $5.90 a barrel, LSEG data showed.

REFINERY UPDATES

- A power outage on Sunday forced the shutdown of Venezuela's largest refinery, the 645,000-barrel-per-day Amuay, though the electric service was later restored, workers from that facility and residents said.

OTHER NEWS

- Oil prices rose on Monday following days of tit-for-tat strikes by the U.S. and Iran that underscored the fragility of their interim peace deal and again slowed energy shipping through the Strait of Hormuz.

- The United Nations is working with countries to resume the evacuation of hundreds of ships and thousands of stranded seafarers from the Strait of Hormuz after the effort was halted earlier this week, a top U.N. agency official said on Friday.

- The U.S. diesel futures crack spread, a measure of profitability for refiners, hit a three-week high as analysts said supply tightness for the product is set to persist even after a preliminary deal was reached to end the Iran war.

- People in the Philippines are flocking to install solar power on rooftops and escape the burden of soaring electricity prices, making it the world's biggest spender on solar panels since the war in Iran started.

WINDOW TRADES

- 180-cst HSFO: No trade.

- 380-cst HSFO: One trade.

- 0.5% VLSFO: Two trades.

ASSESSMENTS