Delivered Bunker Premiums Recover Slower Than Cargoes


  • High-sulphur bunker fuel has risen to an average of $9/t in June, up from $6.50/t in May and $5/t in April.
  • Physical bunker suppliers and barge operators in Singapore are struggling to deliver fuel and are taking nearly a week.
  • Bunker tanker market is likely to switch from carrying 3.5pc to 0.5pc gradually based on demand.

According to an article published in Argus Media, delivered premiums for high-sulphur 380cst (HS380) bunker fuel, or the difference between delivered on board and cargo prices, have risen to an average of $9/t this month, up from $6.50/t in May and $5/t in April.

Singapore struggling to meet demands

Physical bunker suppliers and barge operators in Singapore are increasingly struggling to deliver fuel promptly, with most deliveries scheduled no less than one week forward. Delivered premiums for smaller size volumes can be as high as $15/t, according to one trader.

The market is unlikely to start cleaning out barges to deliver low-sulphur fuel oil (LSFO) until the third quarter of this year, most market participants agreed on. But “some suppliers want to capture volume earlier in order to fill up slots, with prompt deliveries, therefore, rising to higher premiums“, according to one trader.

Difference in assessment levels

Market participants differ in their assessment of how the market will transition logistically to the IMO 2020 sulphur cap on marine fuels from 1 January 2020. The bunker tanker market will switch from carrying 3.5pc to 0.5pc gradually, in line with demand, said a supplier. Others anticipate that the transition will be less smooth, depending on the availability of 0.5pc fuels and whether the process of cleaning tanks will be done thoroughly or not.

There will be a necessary downtime in the barge market associated with switching from HSFO to LSFO, due to the installation of MFM systems and software upgrades“, according to one buyer.

Rising demand for fuel oil

Despite rising premiums, suppliers said that the delivered market is not fully matching the strength in the fuel oil cargo market. Rising summer demand for fuel oil in the Middle East amid heightened geopolitical tension in the region have seen previous flat prices rise firmly.

The backwardation for the HS380 grade this month has averaged $6.70/t, up significantly from $1.40/t in May. This strength is set to continue, with arbitrage flows from Europe and the Americas to Singapore forecast to fall to 1.7mn t (11mn bl) in June and 1.5mn t in July compared with 2.64mn t in May.

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Source: ArgusMedia


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