Supported by shrinking supplies and firm demand, Asian refiners’ profit from producing very low sulphur fuel oil (VLSFO) rose to a one-year high this week, setting the stage for a trend that could persist throughout the year, traders and analysts said.
“Tightness in the fuel oil complex will remain a common theme through 2021, especially as the tightness in crude ensures that any uptick in margins will be transferred straight to crude producers if OPEC+ producers can hold their nerve,” said Energy Aspects in a note to clients last week.
The front-month VLSFO margin was at $15 per barrel above Dubai crude on Tuesday, its highest since Feb. 20 and up from $11.75 a barrel at the start of the year, according to Refinitiv data in Eikon.
VLSFO refining margins have spiked this week “amid tightness in the Asian market,” said Sri Paravaikkarasu, director for Asia oil at FGE.
