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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