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Fuel-oil prices in Singapore, Asia’s biggest energy trading hub, may weaken relative to Dubai crude as imports from Russia, Mexico and the Caribbean drive up record stockpiles.
Deliveries to Singapore will rise as much as 20% next month from June to 4.2 million metric tons, according to a Bloomberg survey of seven traders from Singapore to Tokyo, who declined to be identified as they aren’t authorized to speak on transactions. The discount to crude may widen to US$9 ($12.6) a barrel, the most in a year, from US$5.55 yesterday, the survey showed.
Deliveries to Singapore will rise as much as 20% next month from June to 4.2 million metric tons, according to a Bloomberg survey of seven traders from Singapore to Tokyo, who declined to be identified as they aren’t authorized to speak on transactions. The discount to crude may widen to US$9 ($12.6) a barrel, the most in a year, from US$5.55 yesterday, the survey showed.
“Fuel-oil imports into Singapore will remain steady in July, and probably in August,” said Yasuhito Imaizumi, a Singapore-based trading manager at Petro Summit Pte, a unit of Sumitomo Corp., Japan’s third-largest trading company.
Refiners are creating a glut of the heavy residue from processing crude as they boost output of gasoline and diesel. Singapore’s onshore stockpiles climbed to a record 25.7 million barrels on April 21, according to the Ministry of Trade and Industry.
Inventories swelled as production has outpaced a recovery in the shipping industry, the main user of 380-centistoke grade of fuel oil. Centistoke ratings measure viscosity when fuel oil is heated. Higher centistoke grades have a slower flow rate and require blending with lighter fuels for use in ship engines and power stations.
CRACK SPREAD
The difference in price, or crack spread, between 180- centistoke grade and Dubai oil was zero as recently as Jan. 29. Since then, the discount to crude widened to as much as US$8.84 a barrel on May 5 compared with an average US$3.86 over the past 12 months.
Flagging demand in China, Asia’s biggest energy user, may increase Singapore inventories. The International Energy Agency forecast on June 10 that Chinese consumption of residues will drop 17% this year even as its demand for refined products climbs 7.9%.
Supplies from Russia may increase in July because of a reduced tax on fuel-oil exports, traders said. The duty is set to decline to US$96.90 a ton on July 1 from US$112.70 a ton after prices for the country’s benchmark Urals crude fell, according to the Finance Ministry.
