Fuel Oil
Market Overview
With a huge reduction in medium-heavy Middle Eastern crude intake, there is simply not enough resid going around. Even higher volume of WTI or any of the light grades will yield nowhere near enough resid to make up for that.
The RFCC runs will still need to be sustained at their own minimum rates at the very least and at these margins we are seeing, little resid will be available for the blend pool. Watch out gasoline!
On the other hand, with dirty freight still expensive, forward landed diffs for blend components into Singapore remain firm. And with premiums in the low-20s, forward blend margins for 0.5 don’t look particularly attractive anymore.
And at these premiums, the low sulphur pool is completely losing to the high sulphur pool when it comes to pulling any available mid-sulphur components.
What is the probability of Asian refineries realizing in the coming weeks that they perhaps won’t have enough of the resid molecules and that hedges will need to be unwound i.e. by buying back cracks? High in our view.
