Fuel oil refining margins extended their gains on Tuesday which rose to some their highest levels since at least 2016, industry sources said. Since the start of the year, refining margins of the industrial fuel have been boosted by tighter supplies as well as firm demand which typically rises in the summer months as demand for power generation rises to meet cooling demand.

REFINING MARGINS

Fuel oil margins have soared across all major regions this year following the extension of OPEC-led cuts which reduced supplies of fuel oil rich medium and heavy crude oil.

Ongoing investment into upgrading capacity in India and Russia as well as declining production from Venezuela are among other supply-side supportive factors.

Firm bunker fuel demand coupled with rising demand for power generation during the summer months are also expected to strain near-term supplies.

Brokers pegged the July barge crack to Brent crude at about minus $5.15 a barrel on Tuesday, up from minus $5.25 a barrel in the previous session.

“Last year the highest the (barge) cracks got was about minus $6 (a barrel)…I can’t remember the last I saw cracks so strong,” said one Singapore based fuel oil broker.

WINDOW TRADES

Five cargo trades were reported in the Platts window, totalling 20,000 tonnes of 180-cst fuel oil and 80,000 tonnes of 380-cst fuel oil.

A total of 0.98 million tonnes of fuel oil have traded in the window since the start of June, against 1.94 million tonnes in May.

Trafigura has been the primary buyer of fuel oil cargoes this month with 440,000 tonnes purchased in the window so far followed by Hin Leong which bought 240,000 tonnes so far in June.

PetroChina has been the main supplier this month having sold 400,000 tonnes of fuel oil so far.

TENDERS

India’s IOC sold 35,000 tonnes of 380-cst high sulphur fuel oil for July 11-13 loading to Gulf Petrochem at a premium of about minus $6.50 to minus $7.50 a tonne to the IOC formula on an FOB basis.

Source: Reuters (Editing by David Evans)