ASIA RESIDUAL FUELS: Key market indicators for June 20-24

Marine fuel oil supply in Singapore is expected to remain tight June 20-24 amid a high gasoil crack spread, though the city-state is likely to receive a higher inflow of arbitrage cargoes in July than in June.

However, high sulfur fuel oil supply is likely to remain ample in the week due to increasing inflows from the Middle East to Asia and high refinery operating rates, market sources said.

Crude oil futures kicked off the week lower in mid-morning trade in Asia June 20, with August ICE Brent at $112.72/b at 11 am Singapore time (0300 GMT), down from $120.34/b at the Asian close June 17.

Marine fuel 0.5%S

** Supply is expected to remain tight in Singapore this week as the gasoil crack spread is much higher than for marine fuel 0.5%S. The Singapore July gasoil swaps crack spread to Dubai crude hit a record high $65.39/b June 17, almost double the marine fuel 0.5%S to Dubai crude spread at $33.53/b, S&P Global Commodity Insights data showed. Blending components to produce marine fuel 0.5%S were being taken by the gasoil market as a result, traders said.

**July cargo arrivals in Singapore are likely to be higher than in June because of a wide East-West spread in late May, which could result in a slight build in stockpiles in the second half of July.

** The marine fuel 0.5%S cash differential has been recovering since mid-June, rising for four consecutive days to $73.61/mt June 17, S&P Global data showed.

** The low sulfur bunker market is likely to continue to be supported by a steady bunker demand in Singapore as well as underlying supply tightness.

** Stronger freight rates in the clean tanker segment have resulted in a higher number of fixtures east of Suez, with market sources expecting a higher number of vessel arrivals in Singapore for June.

** The Singapore delivered marine fuel 0.5%S bunker premium to cargo averaged $80.60/mt in the week ended June 17, down from $87.39/mt the week before, S&P Global data showed, onm expectations that LSFO supply tightness could ease slightly on higher cargo inflows.

** Supply tightness in Fujairah has resulted in a flip in the differential to Singapore marine fuel 0.5%S bunker prices. Fujairah delivered marine fuel 0.5%S moved higher than in Singapore June 15 after almost a month in discount, and was $30/mt higher than in Singapore on June 17, S&P Global data showed.

** Traders expect Hong Kong's LSFO inventories to decline from early July after most June-arrival replenishment stocks were committed for fixtures in the downstream market.

** Tepid demand for LSFO bunkers is likely to cap South Korea's bunker premiums for the rest of June, as the product is available for prompt delivery by at least two local refiners, market sources said.

** Rising stockpiles of LSFO amid subdued sales are expected to cap both the delivered and ex-wharf premiums at Zhoushan, fueling expectations of attracting demand during H2 June, local bunker suppliers said.

High sulfur marine fuel

** Supply in Singapore's HSFO market is likely to remain ample in J2 June due to increasing supply from the Middle East, market sources said.

** The high sulfur straight-run fuel oil market has been seeing a recovery in premiums as the 180 CST HSFO crack spread fell. As high sulfur straight-run fuel oil prices are linked to 180 CST HSFO assessments, a drop in crack spreads could result in buyers paying higher premiums.

** Easing supply in the high sulfur bunker market is likely to continue to pressure prices. The delivered high sulfur 380 CST bunker premium to cargo averaged $13.57/mt in the week to June 17, up from $12.55/mt the week before, S&P Global data showed.

** Lackluster demand for HSFO in Hong Kong is likely to further pressure delivered bunker premiums, while inventory remains buoyed, traders said.

** HSFO stocks at refineries in Japan are reportedly ample amid moderate spot bunker demand, and traders expect delivered premiums to maintain a competitive edge over neighboring ports in North Asia this week.

** An uptick in HSFO inflows from the Middle East and Singapore in June has elevated inventory levels at Zhoushan and Shanghai, which is likely to soften delivered bunker premiums for the rest of June, bunker suppliers said.