The Asian low sulfur fuel oil market is likely to remain lackluster in 2024 amid a potential build in regional stock levels, while downstream bunker demand is expected to grow at a slower pace on the back of global macroeconomic concerns and as new scrubber-fitted vessels drive consumption growth for the cheaper high sulfur grades, says an article published on sp global website.
Summary
- The Asian low sulfur fuel oil (LSFO) market is expected to remain lackluster in 2024 due to a potential buildup in regional stock levels.
- Downstream bunker demand is expected to grow at a slower pace due to global macroeconomic concerns and the growing consumption of cheaper high sulfur grades by new scrubber-fitted vessels.
- Mega-refineries like Kuwait’s Al-Zour and Nigeria’s Dangote could lead to surplus availability of fuel oil, contributing to increased LSFO availability in the market.
- Despite global recessionary factors, Asian petroleum consumption, especially in China, remains less affected. However, these economic concerns are anticipated to influence the overall bunker demand.
- Sales of the International Maritime Organization-compliant LSFO in Singapore rose in 2023, but the share of LSFO in overall bunker sales declined, indicating a shift in market dynamics.
Supply Surplus And Weak Demand Forecast
The Asian low sulfur fuel oil (LSFO) market is predicted to experience a lackluster performance in 2024 due to a potential buildup in regional stock levels. Weaker downstream bunker demand is expected, influenced by global macroeconomic concerns and the growing consumption of cheaper high sulfur grades by new scrubber-fitted vessels.
Impact Of Mega-Refineries
While Kuwait’s Al-Zour mega-refinery might have a diminished role in influencing the Asian LSFO market, new capacity additions, such as Nigeria’s Dangote refinery, could lead to surplus availability of fuel oil. The startup phase of such refineries may contribute to increased LSFO availability in the market.
Global Economic Concerns And Bunker Demand
Despite the recessionary factors affecting petroleum consumption globally, Asian consumption, especially in China, remains less affected. However, the overall bunker demand is anticipated to be influenced to some extent by these global economic concerns.
Singapore’s Bunker Hub Dynamics
Sales of the International Maritime Organization-compliant LSFO in Singapore, the world’s largest bunker hub, rose in 2023. However, the share of LSFO in overall bunker sales declined, indicating a shift in market dynamics. Traders in Singapore foresee continued pressure on downstream margins due to increased LSFO stocks.
Price Dynamics And Margins
The LSFO cash differential against the Mean of Platts Singapore strip has shown a significant decrease in 2024 compared to previous years. Traders anticipate intense competition and pressure on downstream margins throughout 2024.
Al-Zour Refinery As A Swing Factor
Kuwait’s Al-Zour refinery, while initially impacting LSFO fundamentals in 2023, is expected to have a relatively unchanged to slightly lower impact in 2024. Concerns surrounding exports from Al-Zour persist, with the refinery’s production influencing LSFO market dynamics in the first half of 2024.
HSFO Competition And Scrubber Investments
The HSFO market is projected to grow in terms of bunkers due to the increasing adoption of scrubbers on new ships. Better economics, including lower installation costs and shorter downtime at Chinese shipyards, are driving investments in scrubbers. This growth in the HSFO market is expected to outpace that of LSFO.
Market Spread And Economic Considerations
Singapore’s HSFO sales have risen substantially, driven by increased demand for scrubber-fitted vessels. The spread between Singapore’s 0.5% sulfur marine fuel oil and HSFO prices has decreased, reflecting changing market dynamics and economic considerations for shipowners.
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Source: sp global
