August Pricing Analysis - Asia Fuel Oil

SUMMARY

Singapore 380cst HSFO led the complex in August as supply tightened materially: arrivals fell to 1.63 MT from July's 1.91 MT, with Saudi imports dropping 245.4KT to zero (Vortexa) and Russian exports curtailed by persistent Ukrainian attacks on refineries and loading ports. The 380cst average rose 15.9% MoM to $576.00/MT and the physical differential to MOS jumped six-fold to +$29.64/MT from +$4.98/MT. Singapore 0.5% VLSFO averaged $737.55/MT (+10.2% MoM) on almost flat arrivals (2.28 mn MT in August vs 2.22 mn MT in July), with the crack holding at $27.30/bbl as Dangote's RFCC ran near 80% and firm middle distillate cracks diverted low sulfur components away from the blend pool. Late month, market sentiment flipped: the HSFO crack collapsed from +$6.41/bbl (7 Aug) to -$4.92/bbl (28 Aug) as Middle East producers refined more medium sour crudes into fuel oil and a crude-led selloff on 26 Aug (reported Iran-Oman talks on managing Strait of Hormuz shipping flows) took 380cst down $34.07/MT in a session. The market structure steepened sharply for both curves, with the VLSFO M1-M12 backwardation widening $21.83/MT to +$145.24/MT. If Hormuz flows normalize, the prompt tightness premium on both grades is expected to fall.

MARKET ACTIVITY

[Who was active? Buy/sell ratios, dominant counterparties, volumes, behavioral shifts vs prior month.]

• The 380cst HSFO window drew 231 bids against 36 offers with only 4 trades (89,000 MT) completed; a consumer and trading houses (PetroChina 53 bids, Mercuria 49, Union 48, Shell 36) chased scarce offers, with producer selling from AramcoSG (11 offers) the only steady supply
• The 0.5% VLSFO window ran the opposite way, with offers outnumbering bids 122 to 100 and 30 trades (760,000 MT) completed; intermediary selling dominated the offer side (Vitol 40, Shell 38, Trafigura 20, BP 10), consistent with adequate cargo availability on flat arrivals

PRICE ACTION

• The 380cst HSFO grade opened at the monthly low $522.79/MT (3 Aug), peaked at $625.45/MT (20 Aug), closed $576.34/MT; average $576.00/MT vs July's $496.89/MT (+15.9% MoM, +45.7% YoY)
• VLSFO opened at $749.03/MT, high $758.64/MT (11 Aug), low $690.42/MT (26 Aug), closed $752.38/MT; average $737.55/MT (+10.2% MoM, +52.0% YoY) in a $68.22/MT range, a third of July's $213.59/MT

380cst HSFO FOB Cargoes (USD/MT)

0.5% VLSFO FOB Cargoes (USD/MT)

CROSS-MARKET DYNAMICS

• The HSFO crack vs Dubai crude averaged +$1.86/bbl but it tracked a slippery slope in August, sliding from +$6.41/bbl (7 Aug) to -$4.92/bbl (28 Aug) and closing -$4.23/bbl, as increased production from Middle East producers restored high sulfur supply
• The VLSFO crack held elevated at +$27.30/bbl avg (vs +$28.69/bbl in July); Dangote's RFCC reportedly operates at roughly 80%, cutting LSSR offered to the market. Firm middle distillate (MD) cracks kept low sulfur components in secondary units for MD yield, sustaining blendstock scarcity on the supply side

CROSS-REGIONAL DYNAMICS

• Fujairah vs Singapore HSFO averaged -$50.49/MT vs July's -$38.78/MT, widest -$60.18/MT (17 Aug); the widening tracked Singapore's arrivals loss (Saudi to zero, Russian flows curtailed), Singapore strength rather than Fujairah weakness
• The spread narrowed to -$34.73/MT by 31 Aug as shuttle supply reached the high sulfur market

CURVE STRUCTURE

• Backwardation steepened on both grades: VLSFO M1 gained $73.95/MT vs M12 +$52.12/MT; HSFO M1 +$65.80/MT vs M12 +$50.64/MT; front tenures priced current arrivals tightness while back tenures priced normalization
• The backwardation held firm despite the 26 Aug flat-price selloff; the curve is treating Hormuz-driven supply relief as a prompt event, not a structural repricing

0.5% VLSFO swaps (USD/MT)

380cst HSFO swaps (USD/MT)

PRICE VOLATILITY

• HSFO CV fell to 5.49% from July's 12.33% despite a 15.9% MoM average gain: a directional supply-led grind, not a shock regime
• VLSFO’s CV of 2.70% against a +10.2% MoM average gain on outright price reads as a supported, one-way market

SOMETHING TO WATCH

• HPCL offered 33KT of 320-350cst 2.2-2.4% sulfur HSFO for 17-19 September loading from Vizag on a MOPS 380 basis, closing 31 August, heard to have been taken by Totsa; incremental non-Russian regional supply of this kind, alongside the reported Iran-Oman Hormuz shipping talks and rising Middle East shuttle vessel activity, chips away at the supply scarcity narrative underpinning August's six-fold MOS premium jump
• Dangote's RFCC operating rate remains the swing factor on whether LSSR returns to the blend pool; the weekly VLSFO vs MOS close and September spot premia are the reads

Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.

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