Prompt timespreads for 380-cst high sulphur fuel oil (HSFO) have flipped into a backwardated market structure as of Wednesday, after holding in contango for months, trade sources said.

Singapore’s 380-cst HSFO balance-January/February timespread was pegged in a backwardation of 50 cents a metric ton at the Wednesday Asia close, according to data from sources.

The spread has been holding in contango since mid-October, according to LSEG data.

The flip reflects improving sentiment for the prompt market outlook, though some trade sources said this was not fundamentally driven. Meanwhile, spot differentials for HSFO continued to trade at a discount.

As for very low sulphur fuel oil (VLSFO), the spot market slipped back into a discount as of Wednesday, following two sessions of short-lived premiums. Offers for the product dipped back into discounted territory, with one trade emerging.

In other spot sales, India’s HPCL offered more HSFO for loading in January via a tender closing on Thursday. The cargo of 33,000 tons is expected to load between January 20 and 22 from Vizag port.

Cracks for fuel oil inched up on Wednesday. VLSFO February crack (LFO05SGBRTCMc1) closed at a premium close to $3.50 a barrel, based on data by LSEG, while the 380-cst HSFO crack (FO380BRTCKMc1) rose to a discount of around $5.80 a barrel.

INVENTORY DATA

– Fujairah heavy fuel inventories (FUJHD04) fell 10.2% to 8.90 million barrels (1.40 million tons) in the week to January 5, FOIZ data published by S&P Global Commodity Insights showed.

OTHER NEWS

– Oil prices fell on Wednesday after President Donald Trump said the U.S. had reached a deal to import $2 billion worth of Venezuelan crude, a move that is expected to increase supplies to the world’s largest oil consumer.
– President Donald Trump unveiled a plan to refine and sell up to 50 million barrels of Venezuelan oil that had been stuck in Venezuela under U.S. blockade, in a further sign that Washington is coordinating with the Venezuelan government since capturing President Nicolas Maduro.
– California Governor Gavin Newsom said that Valero Energy would keep importing gasoline into Northern California after its Benicia refinery ceases operations in April rather than making a full exit from the market.
– Shell has agreed to buy stakes in two undeveloped offshore blocks in ultra-deep waters offshore Angola from Chevron, the European energy major said.

WINDOW TRADES

– 180-cst HSFO: No trade
– 380-cst HSFO: One trade
– 0.5% VLSFO: One trade
Source: Reuters