High sulfur fuel oil cracks in Asia are strengthening amid weaker crude
prices and healthier demand in the fuel oil and bunker fuel markets, hitting
their highest levels since the start of this year.

The front-month February FOB Singapore 180 CST HSFO/Dubai crack swap —
which measures the relative value of the product to crude oil — rose 73
cents/b day on day to minus 3.12 cents/b Tuesday, S&P Global Platts data
showed.

The crack was last assessed higher on December 19, 2017, at minus 2.89
cents/b, Platts data showed.

Meanwhile, the front-month February FOB Singapore 380 CST HSFO/Dubai
crack swap rose 69 cents/b day on day to minus 4.10 cents/b Tuesday. The crack
was last assessed higher on December 21. 2017, at minus 3.87 cents/b.

HSFO cracks have been on a general downtrend from late June 2017 to early
January 2018, before rebounding in recent weeks as crude prices declined amid
weaker global risk appetite from sell-offs across equity markets.

The front-month Dubai swap fell to its lowest level this year, assessed
at $59.76/b Tuesday.

Slight improvements in the fuel oil and bunker fuel market has also
bolstered fuel oil cracks, with bunker fuel sales in Singapore rising 3.2%
year on year to a record high of 4.61 million mt in January, data released
Tuesday by the Maritime and Port Authority of Singapore showed.

Sales were last higher in January 2017 at 4.46 million mt, MPA data
showed. January sales were also up 7.2% from December’s 4.3 million mt.

The January sales also marked the first time when the world’s largest
ship refueling destination saw a record volume of 3.37 million mt in 380 CST
bunker sales, up from the previous record high of 3.34 million mt in January
2017.

Last month also saw a record monthly high sales of 980,000 mt of 500 CST
HSFO, up significantly from its previous record high of 899,400 mt reached in
May 2016.

In addition, persistently strong demand from North Asia for fuel oil as a
utility grade over the current severe winter has also been a much-needed boost
for the overall market, trade sources said.

South Korea has been importing quite consistently since December as has
Japan due to some nuclear station outages, traders said.

South Korea has been importing parcels of around 50,000 mt/month and
Japan’s volumes have doubled to around 400,000-600,000 mt/month, they added.

–Jeslyn Lerh, jeslyn.lerh@spglobal.com

–Goh Shu Hui, shu.hui.goh@spglobal.com

–Edited by Pankti Mehta, pankti.mehta@spglobal.com

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