/Agencia Reuters
Asia received its first shipment of fuel oil from Mexico in nine months and more are expected to arrive, as rising prices in the Asian market attract supplies following the loss of Middle Eastern cargoes due to the war in Iran, according to industry sources and shipping data.
The incoming shipments from Mexico will partly ease concern over declining inventories in Singapore, Asia’s hub for ship fuel trade and supply, after the Iranian conflict disrupted most fuel oil supply from key Middle Eastern exporters, such as Iraq and Kuwait, through the Strait of Hormuz.
The Suezmax tanker Orion, carrying about 160,000 metric tons (1 million barrels) of Mexican high-sulfur fuel oil (HSFO) loaded at the Salina Cruz refinery on the Pacific coast, arrived in Singapore on May 7, according to operators and vessel tracking data from Kpler.
PMI, the trading arm of Mexican state energy company Pemex, offered another 150,000-ton cargo of HSFO to Asia for June delivery through a tender that closed on May 6, with bids valid until May 8, according to a Singapore-based operator familiar with the matter. PMI is expected to award the tender late on Friday, May 8.
Fuel traders noted that high prices in Asia are attracting cargoes to the region, while there is an oversupply in the Americas.
“Mexican fuel barrels have to seek more optimal profitability due to the influx of Venezuelan oil on the U.S. Gulf Coast,” said Emril Jamil, senior analyst for crude and fuel oil at LSEG.
Most of Mexico’s fuel oil exports typically land in the United States or the Caribbean islands, Kpler data showed. Neither Pemex nor its trading arm immediately responded to a request for comment.
Traders in Asia have been seeking more arbitrage supplies from the West following the supply disruption in the Middle East. The arbitrage is open, with the 380-cst HSFO East-West spread for the next month standing near $60 per ton this week, more than double the pre-conflict level, according to LSEG data.
The spread exceeded $80 per ton on March 9 following the Middle East war, according to the data, a level not seen since September 2019. A wider East-West price spread – which measures the price difference between Asian fuel oil versus supply from the Americas and Europe – typically makes it more attractive to ship cargoes from the West to Asia.
