Low-grade fuel oil glut in Asia may up bunker costs

Asia marine fuel costs could climb in coming months, defying near-record fuel oil stocks in top bunkering port Singapore, as traders struggle to get enough blending fuels to make bunker for the heavy shipping traffic. The region is getting above-average Western fuel oil inflows this month and may see record imports for April, but most are low-grade residues from Russia and Mexico, unsuitable for direct use by ships, traders said. This stokes an unusually high demand for better-quality fuel with low viscosity of between 5 and 100 centistoke, which traders use to blend with the raw cargoes in onland tanks or floating storage to make the 380-cst bunker or marine fuel grade. A total 3.3-3.4 million tonnes of Western cargoes have been fixed for March while April volumes are at 3.7-3.8 million tonnes, the highest since September and above last year's monthly average of 3.0 million tonnes. Up to 60 per cent are high-viscosity 600 to 800 cst raw cargoes, including M100 fuel oil from Russia. "The problem with this market is that it operates on a herd mentality," a Singapore-based Western trader said.