US fuel oil crack spreads widened through the day Friday as support slowly crumbled in the face of weakening Brent crude futures.
Traders had pegged fuel oil as well-supported compared with crude early in the morning, noting fuel oil swaps falling noticeably less than Brent front-month crude futures, which dropped more than $2/b in the morning.
"If you look at crack rolls, they're all stronger on the day. Just from a structural perspective we have fought off this Brent carnage," a Gulf Coast fuel oil trader said.
Demand for fuel oil remains low, however, and appears likely to continue to remain low for some time, offering little physical support to swap strength compared with crude futures. Though spot tenders for three 1%S deliveries into Argentina had been brought to the market Wednesday, they had been closed out by Thursday evening, pushing fuel oil back toward its recent status quo.
The May 3%S barge to Brent crack spread tightened to minus $10/b in the morning but by 3:15 p.m. EDT it had widened to minus $11.05/b, near where spreads had been at the start of the week, as fuel oil markets began to more closely track Brent crude.
The lack of demand took the same toll on LSFO. The May 1%S swap, which had dropped only 60% as much as Brent crude had in the morning, fell more than crude by 3:15 p.m., dropping $1.15 to $95.50/b. By comparison, ICE front-month Brent crude futures were assessed at 3:15 p.m. at $103.08/b, down $1.05.
A single point of potential demand remained on the horizon, with several sources signaling that more tenders for May deliveries of 1%S into Argentina could be forthcoming in the next few weeks.
