A decline in demand for 380 CST high sulfur fuel oil in Singapore that is outpacing a gradual reduction in supply kept the Singapore viscosity spread in double-digit territory for the second consecutive trading session Tuesday, S&P Global Platts data showed.

The spread, which measures the difference between the 180 CST and the 380 CST Singapore HSFO assessments, has remained above $9/mt since May 13, the longest sustained run above that level since early March, Platts data showed.

The spread first hit double digits in the month at $10.05/mt on May 15. That was a level not seen since April 8, when there was a scramble to store all fuel oil not contractually committed in floating storage after the contango in the front months of both the Singapore HSFO and low sulfur fuel oil swaps markets widened to minus $10.50/mt on April 6, a six-month high at the time.

However, the double-digit viscosity spread on April 8 proved to be a one-off, with the last extended run of spreads wider than $10/mt seen over February 19-March 2.

The viscosity spread was assessed at $10.56/mt Tuesday, the second consecutive session above $10/mt after widening to $11.53/mt last Friday, Platts data showed. Monday was a public holiday in Singapore.

"What's interesting this time about the widening viscosity spread is the current tepid bunker demand for 380 CST HSFO, whereas 180 CST HSFO demand from the power sector is holding those prices relatively steady," a trader in Singapore said. "Since the implementation of the IMO 2020 mandate on January 1, supply of 380 CST HSFO has gone down."

The 180 CST HSFO grade is almost exclusively used for power generation, and demand for electricity has been rising across Asia in May as multiple countries ease lockdown restrictions imposed to contain the spread of the coronavirus.

In contrast, demand for 380 CST HSFO, used by the bunkering sector, has weakened further in the month. The premium for delivered Singapore HSFO bunker over the Singapore 380 CST HSFO cargo assessment has averaged $15.81/mt to date in May, narrowing from $24.28/mt in April.

As a result, the viscosity spread is expected to remain wide until the volume of arbitrage HSFO cargoes arriving in Singapore falls even further. "As both [high and low sulfur] fuel oil volumes coming from the west to Singapore are likely to drop in the coming months and take some pressure off the supply side, this might even things out in the 380 CST market," another trader in Singapore said.