- The Asian HSFO market faces challenges in 2024, marked by abundant supplies and reduced utility demand, despite new ships equipped with scrubbers.
- Factors include increased Russian and Middle Eastern supplies, declining utility interest in South Asia, and economic dynamics favoring specific fuel grades.
- The Chinese outlook, downstream market challenges, and the dominance of bunker demand add complexity to the fuel oil sector’s landscape.
The Asian high sulfur fuel oil (HSFO) market is anticipated to face challenges in 2024, driven by abundant supplies and diminishing utility demand. Despite the installation of scrubbers on new ships, offsetting consumption, factors like increased Russian and Middle Eastern supplies and declining utility interest in South Asia may impede market growth.
Surge in 180 CST HSFO and Foreign Origin Barrels
Asia’s supply of 180 CST HSFO is poised to increase in 2024, driven by South Asia’s pursuit of cost-effective and cleaner alternative fuels for power generation. Russian-origin barrels and steady Middle Eastern supplies, particularly heading to Singapore, further contribute to the market’s complexity.
Impact of Scrubber-Equipped Fleet Growth: Economics and Spread Analysis
The global scrubber-equipped fleet is expected to grow, reaching 5,241 in 2024, with vessels favoring 500 CST and 700 CST grades due to economic advantages. The Hi-5 spread between Singapore 0.5% sulfur marine fuel oil and HSFO cargo prices has narrowed, reflecting evolving market dynamics. However, geopolitical tensions and external commodity volatility remain influential factors.
Chinese Outlook and Downstream Market Challenges
Chinese independent refineries, facing crude import controls, increasingly import fuel oil to compensate for feedstock shortfalls. The government’s set fuel oil import limit for 2024 and potential storage strategies may impact the market. Despite robust scrubber adoption, downstream HSFO margins may face competition pressures, with abundant supplies limiting premium growth.
Bunker Sector Driving Consumption Growth
Despite challenges, bunker demand continues to drive over 70% of Asia’s total fuel oil consumption. While HSFO sales in Singapore surged in 2023, intense competition limits premium growth. With the region’s fuel oil demand projected to rise in 2024 and 2025, the industry faces complexities balancing supply and demand.
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Source: spglobal
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