Asian residual fuel market is likely to garner support at prevailing levels in the near term on lower western arbitrage inflows into Singapore, says Platts.
Tightening supplies of the upstream Singapore marine fuel 0.5%S cargo coupled with healthy demand for the downstream end-user bunker grade has bolstered market optimism.
Marine fuel 0.5%S
- August-arrival arbitrage low sulfur fuel oil cargoes in Singapore are estimated at 1.5 million-1.8 million mt, down from about 2.1 million-2.2 million mt in July, according to most market traders surveyed by S&P Global Platts.
- There are fewer cargoes this time from Europe and North America; in America, bunker demand has increased while in Europe, the arbitrage window to the East is closed, a Singapore-based trader said.
- Sources also pointed to the backwardation market structure at the front of the FOB Rotterdam 0.5%S marine fuel swaps curve, which was prompting sellers to move oil within the local bunker markets.
- Most container lines bunker primarily in Panama and China. After the recent congestion at Yantian [China], as well as typhoon “In-Fa,” making initial landfall in East China on July 25, Panama bunker prices had seen a strong rally with more vessels bunkering there, a shipowner who also buys bunkers at Panama said.
- China is expected to see tightness in the bunker delivery schedule this week as bunkering operations were suspended on July 22 at Zhoushan and Ningbo due to typhoon In-Fa. Suppliers said normal supply will resume in the week starting Aug. 2.
- Ample supply in South Korea is expected to weigh on prices, market sources said. South Korea’s marine fuel 0.5%S premium to Singapore cargo dropped to $16.32/mt on July 23, the lowest since April 20, Platts data showed.
- Market sources said South Korea’s bunker fuel is oversupplied as SK Energy has boosted its production. As other refiners still need to clear July-delivery bunker fuel, competition among refiners hats up, cutting South Korea’s prices below Hong Kong for the first time since June 29, Platts data showed.
- Bunker suppliers in Singapore said that the availability of bunker barges has tightened partly due to steady demand. As a result, the earliest delivery of the International Maritime Organization-complaint fuel at the bunkering hub of Singapore was mostly scheduled around the first week of August.
- Amid buoyant market sentiments, the Singapore-delivered marine fuel 0.5%S premium to Singapore marine fuel 0.5%S cargo averaged $10.56/mt during the week ended July 23, up to $3.53/mt from the previous week’s average, Platts data showed. The premium rose to a near three-month high of $10.76/mt on July 15.
- Led by an uptick in demand for Fujairah-delivered marine fuel 0.5%S bunker, suppliers estimate July sales to rise around 10% from the previous month’s 512,000 mt.
- Traders said that the premium for Fujairah-delivered marine fuel 0.5%S is firming up as the market faces a slight shortage of bunker barges amid stronger demand.
- Fujairah-delivered marine fuel 0.5%S premium to Singapore marine fuel 0.5%S cargo averaged $2.69/mt during the week ended July 23, up from the previous week’s average of $1.95/mt.
High sulfur fuel oil
- A rally in demand for cargoes in the power generation sector in South Asia, as well as strong demand for late-July and August cargoes from South Korea’s East-West Power amid rising temperatures, has also seen a strengthening of the FOB Singapore 180 CST HSFO cash differential, Platts data showed.
- The South Korean company, which has already sought four 0.3% sulfur cargoes for delivery in the third quarter, is due to seek at least three more cargoes, according to a local South Korean refiner.
- The company benchmarks its purchases against the FOB Singapore 180 CST HSFO assessment, according to a tender document.
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Source: Platts
