Where's the fuel oil arb today?
Sparta Insights Webinar
Slide deck for the August 'Sparta Insights' webinar.
Asia Chart Pack: January
Sparta Insights Webinar I 4 August 2026
June Goh
Senior Oil Market Analyst
Jay Maroo
Head of Product Experts
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The fuel oil arbs that matter most today, live inside Sparta's Global Arbs Dashboard.
What's driving fuel oil's trends, and how to read the signals yourself, without marking your own curves or chasing brokers.
What blend economics say about where the margin really sits, and where it's moving.
In this session
Market narrative
In June, the market was facing a mini-glut of oil due to the prompt crude barrels that exited the Strait of Hormuz, with a mismatch of the physical trading window for Asian refineries.
However, aside from the oil that escaped, the promised barrels may not fully materialise due to escalation of US-Iran tensions again from early July.
When the Houthis entered the fray and attacked vessels at Bab El-Mandeb Strait, vessels started finding alternatives to bypass this chokepoint as well.
30 additional days required to go northbound through the Red Sea into the Suez Canal and round the Cape of Good Hope, leaves a gap in physical crude arrivals into Asia around end August/September.
Likely to see runrates coming off the highs of 80% as refiners wait for cargo replenishment in early October.
Lower crude arrivals from Sep onwards, without as big a buffer from both crude and resid stocks as previously.
The problem is NOT limited to high sulphur as low sulphur streams are produced by the complex refining kits running on medium-sour crudes too.
The problem is the total resid supply.
Visible signs in the market: Petco withdrawing 0.5% fuel oil tender originally for loading 6–7 Aug, citing crude procurement uncertainties. We think it’s more likely due to RFCCs coming back online ahead of time.
Enterprise Singapore data for week of July 29 shows residual fuel oil inventories at 6-week low despite a rise in net imports.
With distillates margins roofing, VGO becomes critical for conversion into diesel and mogas via the HCU and FCC.
Straight run FO prioritised into visbreakers and cokers over bunker blending in order to fulfil min operating requirements of the secondary units.
LSSR prioritised into LRCCUs again for min operating requirements and margins.
Dar Blend recently sold at ICE Brent + $10/bbl due to high value into complex refining kits in Northeast rather than simple topping units for VLSFO production in Singapore/Malaysia.
Resid destruction is therefore very supportive of the low sulphur complex -> driver of Sing 0.5 strength.
Conversion margins for Dangote into Western refining look incredible right now and we recently made the call for Dangote to head West.
Both sulphur curve and blend breakeven methods place current fair breakeven landed values for Dangote around Sing 0.5 + 100 for Sep.
0.5 EW has already moved up since our call last week as Sing attempts to pull the barrel back, but there's probably a bit more upside room.
Sulphur curve based on blending economics suggests Sep Hi5 around $140–145/mt.
The gap between our sulphur curve indication and paper has now narrowed to just $10/mt.
Biggest discrepancy in sulphur is with 1% in NWE where sulphur curve indicates roughly $65–70/mt discount to VLSFO vs $95/mt paper.
Fuel oil arbs
In contrast to VLSFO, cracked Iraqi 4.5% and on-spec HSFO ex-Fujairah tanks barely moved: they certainly don't scream any particular tightness yet.
Stocking for summer burn needs should mostly be satisfied now, so this becomes less and less of a catalyst.
Fuel oil component arbs
USGC VGO values don't justify bringing AG resid over at these levels.
But Eastern refining kits would benefit greatly.
