Fuel Oil Market Stable Amid Bearish Sentiment & Holiday Slowdown

Key Highlights

1. Fuel Oil Price Trends: Prices vary across regions, with LSHS Fuel Oil in Jamnagar commanding a premium due to lower sulfur content.
2. Supply & Demand Dynamics: Weak shipping activity ahead of the Spring Festival and rising blending costs are impacting market sentiment.
3. Key Industry Developments: BPCL, ONGC, and IOCL signed major crude and LNG contracts, expanding India’s energy partnerships.
4. Market Outlook: Short-term stability is expected, with limited price fluctuations before the holiday season.

Fuel Oil Prices: Regional and Global Market Trends

• Virgin 180cST Furnace Oil is priced at ₹47.5/kg in Mumbai and ₹48.5/kg in Mundra, while 180cST Furnace Oil in Mumbai is slightly higher at ₹49/kg. 
• Low Sulphur Heavy Stock (LSHS) Fuel Oil in Jamnagar is priced at ₹56.5/kg, reflecting a premium due to its lower sulfur content.
• The Chinese domestic fuel oil 180CST market experienced a slight decline in late January 2025, with the average price dropping to 765 USD/ton (including tax), a 0.54% decrease from the previous week's 770 USD/ton. 
• The decline was influenced by falling international crude oil prices and bearish market sentiment.

Supply & Demand: Shipping Slowdown and Inventory Shifts

• The domestic fuel oil market in late January 2025 was characterized by weak demand and mixed supply dynamics. Downstream shipping activities slowed as the Spring Festival approached, with many ship owners limiting fuel replenishment and some vessels being suspended. 
• The primary demand was driven by urgent transactions rather than routine operations. 
• The prices of blending raw materials for ship fuel increased, adding pressure to the market.  
• Internationally, the Singapore Enterprise Development Board (ESG) reported a mixed inventory scenario. 
• Light distilled oil inventories fell by 315k barrels to a seven-week low of 14.5 million barrels, while medium distilled oil inventories dropped by 65k barrels to a two-week low of 9 million barrels. 
• However, fuel oil inventories rose by 360k barrels, reaching a four-week high of 21 million barrels. This increase in fuel oil stocks contributed to the bearish sentiment in the market.  

Energy Sector Updates: Key Contracts and Partnerships

• BPCL signed an optional term contract with Petrobras (Brazil) to import up to 6 million barrels of crude oil. OCL and ADNOC (UAE) signed a USD 7 billion contract to supply 1.2 MMTPA LNG for 14 years from 2026. 
• BPCL and ADNOC entered into a 5-year LNG offtake agreement for 2.4 MMT, extendable by another five years. IOCL signed its first LNG export agreement with Nepal’s Yogya Holdings, delivering 1,000 TMT annually via Odisha’s Dhamra Terminal.
• ONGC appointed BP as the Technical Services Provider for the Mumbai High oilfield to enhance production. EIL and BP Business Solutions India Pvt. Ltd. signed an MoU to collaborate on refining, pipelines, and emissions reduction. 
• ONGC Videsh and Petrobras signed an MoU for upstream oil and gas projects in India, Brazil, and third countries. Oil India Limited and Petrobras signed an MoU for deep and ultra-deep hydrocarbon exploration in India.
• BPCL partnered with Israel’s Eco Wave Power to launch India’s first wave energy pilot project in Mumbai. BPCL signed an MoU with the National Sugar Institute, Kanpur, to expand sweet sorghum-based bioethanol production. BPCL signed an agreement with Equinor India Pvt. Ltd. to purchase LPG (propane and butane).

Market Outlook: What’s Next for the Fuel Oil Industry?

• In the near term, the domestic ship fuel market is expected to remain stable with limited fluctuations. As the Spring Festival approaches, shipping activities are likely to remain subdued, with light procurement demand and some vessels suspended.
• The fuel oil 180CST market is anticipated to consolidate at current levels, with no significant price movements expected before the holiday season.