Asian oil market weakens across the board: fuel oil backwardation halves, naphtha plummets by $170, diesel premium hits three-week low
- After the US and Iran reached a two-week ceasefire agreement, the Asian fuel oil market softened on Wednesday, with both high sulfur and ultra-low sulfur fuel oil spot premiums declining. The near-month contract backwardation narrowed significantly: the 380-cst heavy fuel oil April-May spread narrowed from over $43 to about $30, while the ultra-low sulfur fuel oil spread for the same period fell from over $60 to below $40.
- Asian naphtha prices slumped sharply, tracking crude oil's downward trend. Naphtha scheduled for delivery in the second half of May dropped by about $170 to $1,100 per ton. Although the May-June second half cargo backwardation retreated from record highs, it still stayed lofty at $129 per ton. Naphtha's crack spread over Brent crude held near multi-year highs at about $385 per ton.
- The Asian diesel market structure loosened for the third consecutive trading day, with both spot premiums and crack spreads touching three-week lows. The 10ppm diesel crack spread dropped to $54.7 per barrel, and spot premiums to $34.9 per barrel. Traders remained concerned about whether spot cargoes could smoothly pass through the Strait of Hormuz, which limited the overall price decline.
- Shipping industry sources said that more vessel owners might resume transiting the Strait of Hormuz during the ceasefire, but most are still seeking further clarity on logistics arrangements. In the short term, the market continues to face constraints from uncertainties regarding navigational passage.
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