The high premium of high-sulfur fuel oil has retreated from elevated levels, as weak downstream marine fuel demand drags down the spot market.

⑴ Dragged down by weakened downstream demand leading to softer prices, the spot premium for high-sulfur fuel oil in Asia trended weaker towards the end of this week, giving back gains made at the start of the week. The 380cst high-sulfur fuel oil spot price differential has fallen below $25 per ton, compared to around $39 in the middle of the week. Spot quotations were weaker in late May and early July.⑵ Affected by slowing demand, the downstream marine fuel price differential for Singapore-delivered 380cst high-sulfur fuel oil has turned into a discount. According to trading sources, despite a reduction in supply from the Middle East, prompt cargoes are still available. The price spread between May 380cst high-sulfur fuel oil and Brent crude closed at a premium of nearly $1.90 per barrel.⑶ Naphtha refining margins remain stable, as rising tensions in the Gulf have traders closely watching for any signs of supply disruption at the Strait of Hormuz. The naphtha-Brent crude crack is trading at $214.58 per ton, while the negative spread is steady at $60 per ton.⑷ The backwardation in the Asian diesel swaps market has widened, while the East-West price differential discount has narrowed, with refiners' sales still not concluded. Multiple trading sources said that with refineries maintaining higher operating rates than in May, supply in June is expected to continue increasing. Diesel refining margins rose slightly from the previous trading day to nearly $49.5 per barrel, but remain more than $10 lower than a week earlier.