Onshore fuel oil stockpiles in trading hub Singapore rose to a more than seven-month high in the week to August 6, latest data showed, as some sellers struggled to clear stocks due to lukewarm demand and plentiful supplies.
The inventories have been hovering above typical averages for 12 consecutive weeks, weighing on fuel oil prices and margins. Fuel oil is a product that is mostly used for refuelling ships or as a feedstock in some refineries.
Singapore residual fuel inventories rose to 26.32 million barrels (4.14 million tonnes) in the week to August 6, based on Enterprise Singapore data, a level unseen since mid-December.
A surge in incoming supplies last month largely contributed to the build, analysts said. "The inability of the market to clear heavy July arrivals pushed stocks higher. If overall sales continue to remain muted, we may see further downward pressure on prices," said Emril Jamil, a senior analyst at LSEG Oil Research.
Fuel oil arrivals hit a four-month high of more than six million tonnes in July, based on LSEG's estimates, while August volumes are expected to taper off just slightly, but will still remain higher than average.
"Fuel oil cargoes that discharged in Asia rose month-on-month in July, resulting in the stock build. It's unlikely bunker demand could increase and absorb that amount of higher arrivals," said Ivan Mathews, head of APAC analysis at Vortexa.
Some fuel oil traders said there was no particularly bullish driver in sight for the Asia market in the near term, with total inventories remaining high and demand average.
Asia high-sulphur cargo differentials have been holding steady in discounts since July, while premiums for low-sulphur cargoes fell in recent trading sessions.
Singapore's onshore net fuel oil imports rose 38 per cent week-on-week, exceeding 690,000 tonnes in the week to August 6, Enterprise Singapore data showed.
(Reporting by Jeslyn Lerh; Editing by Subhranshu Sahu)