* 180-cst refining margin to Dubai crude narrowest in nearly
* Demand/supply fundamentals bolster refining margins
* Refining margins also supported by weak crude prices
* Further upside potential seen as limited, traders say
(Adds detail, graphics)
By Roslan Khasawneh
SINGAPORE, Nov 29 Singapore's benchmark 180-cst
fuel oil refining margins settled on Tuesday at their narrowest
discount to Dubai crude in almost five years on the back of
robust seasonal demand, limited supplies and falling crude
prices ahead of an OPEC meeting on Wednesday.
Refining margins for the benchmark 180-cst fuel oil have
risen sharply this quarter, supported by supply issues in major
producers like Russia and Venezuela as well as strong demand,
said Nevyn Nah, oil products analyst at Energy Aspects.
In addition to the strong market fundamentals, traders said
tumbling crude prices also contributed to the strengthening in
fuel oil margins.
Singapore's Dec. 180-cst fuel oil discount to Dubai crude
narrowed by 11 cents a barrel on Tuesday to minus
38 cents a barrel, its narrowest closing discount since Feb. 1,
This came as crude oil prices fell on signs that key members
from the Organization of the Petroleum Exporting Countries were
struggling to agree a deal to cut production to reduce global
Demand for fuel oil, used primarily as a marine fuel and
feedstock in power generation, has been bolstered by a recovery
in shipping demand as well as unusually cold weather in East
On the supply side, lower Western arrivals into Asia,
particularly for the lower-viscosity fuels used to blend
residual fuels into the 180-cst grade have stoked availability
concerns, boosting overall fuel oil markets, including refining
Despite the rally over the past few weeks, some industry
participants are doubtful that the refining margins will
continue to rise sharply.
"Our outlook for fuel oil is that right now it's almost as
good as it gets because if you lay down the supply and demand
sectors, everything is all aligned," Nah said. He also said that
seasonal demand for marine fuels and power generation tends to
taper off in the first quarter of the year, while supplies from
the Middle East are expected to rise as refinery turnarounds
On Nov. 9, fuel oil margins briefly turned positive in
intraday trading for the first time since Jan. 2012, when oil
prices had tumbled as Donald Trump edged ahead in the U.S.
Fuel oil is a residual product of the refining process and
tends to trade at a discount to crude oil.
(Reporting by Roslan Khasawneh; Editing by Jane Merriman)