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Asian VLSFO profit margin booms to one-year high; pattern expected to persist in 2021

16 Feb 2021

Profit for Asian refiners for producing Very Low Sulphur Fuel Oil (VLSFO) increased to a one year high in the second week of February 2021 due to shrinking supplies and a steady demand, possibly setting a trend for the year ahead, reports Reuters.

The front-month margin for VLSFO contracts was reportedly at USD 15 a barrel more than Dubai Crude on Tuesday (9 February), up from USD 11.75 from the start of the year.

Analysts purportedly stated tightness in the fuel oil industry will remain a recurring theme throughout 2021 as it ensures any increase in profit margins will be transferred to crude producers if Opec+ producers can continue to withhold supply.

Healthy VLSFO margins have been supported by a steady demand for bunker fuel, which is allegedly close to returning to pre-pandemic levels in most ports worldwide.

While optimistic prices could induce producers to increase VLSFO output in the short term, remaining refinery production cuts and resilient demand could support VLSFO prices throughout the year.

Published: 16 February, 2021


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