Asia's high-sulfur fuel oil margin turns negative as Gulf shipments rise
High-sulfur fuel oil margins in Asia fell to a $2.29 per barrel discount, driven by increased Middle-East exports and expectations of reduced Middle-East tensions after the U.S. midterm elections.
Asia's high-sulfur fuel oil (HSFO) refining margin slipped to a $2.29 per barrel discount on Thursday, down from a $5.34 premium earlier in the week, according to LSEG data cited by Reuters. The decline follows a rise in fuel oil shipments from the Gulf region to Asian markets, including an eighth-month high of about 729,000 metric tons exported from Fujairah to Singapore and Malaysia in October, based on Kpler data.
Traders note that the Dubai benchmark curve is in contango, with the November contract trading roughly $2 per barrel below the December contract, indicating that current Middle-East supply exceeds regional demand for the first time since early July. Physical flows have been increasing as Gulf producers accelerate shuttle-shipping through the Strait of Hormuz and conduct ship-to-ship transfers in the Gulf of Oman.
Higher shipping costs are limiting European fuel oil supplies to Asia, according to market participants. The combined effect of stronger Gulf exports and tighter European supply has pressured Asian benchmarks and margins lower.
"The November contract of the Dubai benchmark traded at a discount of about $2 per barrel to the December contract," traders and brokers told Bloomberg on Tuesday.