Singapore Marine Fuel 0.5%S timespreads and cash differentials hit five-month highs July 29 amid widespread expectations the inflow of Western arbitrage cargoes into Asia will fall in August.

The Marine Fuel 0.5%S August/September spread stood at $1/mt July 29, the highest since February 13, when the front-end time spread was assessed at $1.50/mt, S&P Global Platts data showed.

The FOB Singapore Marine Fuel 0.5%S cash differential was assessed up 78 cents/mt day on day at 89 cents/mt July 29, the highest since February 26, when it was assessed at $4.92/mt, according to Platts data.

The cash differential is the difference between cargo and swaps values, and reflects the strength or weakness of market fundamentals.

"I think the market is stronger because of lower supply," a fuel oil trader in Singapore said.

"A decrease in Western arbitrage cargoes is expected [in August], while bunker demand is likely about 2.6 million mt [for low sulfur bunker fuel]," a second fuel oil trader in Singapore said.

Fuel oil traders expect the inflow of arbitrage cargoes to decline to 1.5 million mt-2 million mt in August from 2 million-2.5 million mt in July as bearish prices in Asia meant the price spread to Europe was too narrow to spur the West-to-East movement of cargoes.

BUNKER PRICES LAG

Despite the strength in the Singapore Marine Fuel 0.5%S cargo market, discussion in the downstream bunker market remained subdued, with some suppliers lowering offers in a bid to prompt buying interest.

"There is still ample supply of bunker fuel so buyers are waiting to see if prices will decrease," a Singapore-based bunker trader said.

With the current market structure in backwardation, participants were anticipating more suppliers will move LSFO in coming weeks, even though bunker fuel demand has yet to recover.

"Even though there has been a rally in cargo prices, the gasoil market is still seeing a slight decrease, so there hasn’t been a significant recovery in bunker fuel inquiries," a second trader said.

"Discussions for ex-wharf have been quiet because suppliers want to move their existing inventories first. It is also unlikely that ex-wharf suppliers will lower their offers since [FOB Singapore marine fuel 0.5%S] cargo prices are holding up," the second trader added.

Singapore delivered marine fuel 0.5%S was assessed stable day on day at $345/mt July 29. At this level, the premium to the benchmark FOB Singapore marine fuel 0.5%S cargo is at an 11-week low of $12.52/mt. The last time the premium was lower was May 20 at $12.08/mt, Platts data showed.

Singapore ex-wharf marine fuel 0.5%S was assessed unchanged on the day at $335/mt July 29, at a $2.52/mt premium to Singapore marine fuel 0.5%S cargo. The premium was last lower May 19 at minus 30 cents/mt.