Both high sulfur and low sulfur bunker fuel markets are expected to see quieter demand in the week leading up to the Lunar New Year holidays in Singapore, market participants said, although the cargo markets have seen slightly diverging fundamentals, says an article published in S&P Global.
Production Rates
Lower production and a drawdown in stocks has led to a growing Asian marine fuel 0.5%S crack spread, although most LSFO producers have indicated an unwillingness to raise production rates.
High Sulfur Fuel Oil Market
The high sulfur fuel oil market, which has been characterized by balanced fundamentals, is not expected to see a surge in demand before summer kicks in across Asia, which sees additional volumes being pulled in to the subcontinent and the Middle East, according to traders.
Marine Fuel 0.5% Sulphur
The Singapore Marine Fuel 0.5%S balance February-March backwardation Feb. 8 deepened to $5.25/mt from the Feb. 5 assessment of $4.90/mt, with bids at $2.25/mt against offers at $5.50/mt, the Intercontinental Exchange and brokers’ data showed.
The Singapore Marine Fuel 0.5%S market continued on a bullish trend, expecting the market movement to last into February, pointing to a lack of low sulfur crude oil coming out of the Americas to feed into refineries.
Stock Prices
Low sulfur fuel oil stocks on floating storage has been drawn down, bolstering the Singapore marine fuel 0.5%S crack spread, last assessed at an 11-month high of $14.10/b on Feb. 5, Platts data showed.
The direction that the Singapore marine fuel 0.5%S bunker market would take in the ensuing days is dependent on flat price movement and sentiment in the upstream marine fuel 0.5%S cargo market, traders said.
Sulphur Market
The premium for Singapore-delivered marine fuel 0.5%S bunker over FOB Singapore marine fuel 0.5%S cargo, which hit a six-week high of $15.93/mt on Feb. 3, is likely to remain steady at prevailing levels in the near term, traders said.
Upbeat sentiment was underpinned by expectations that an incremental volume of western low sulfur barrels is likely to arrive in March. As such, the market is likely to remain balanced for February delivery trades.
High Sulphur Fuel Oil
According to brokers’ indications and ICE data, the Singapore high sulfur fuel oil viscosity spread for March stood early Feb. 8 at $6.75/mt, wider than the Feb. 5 assessment of $6.50/mt.
The Singapore HSFO market has remained relatively stable compared with the LSFO market amid tighter availability of low sulfur crude oil, and with strong power generation demand for HSFO yet to manifest, according to traders, with the summer season still some months away.
Bunker Demands
Sentiment in the Middle Eastern port of Fujairah has been less-than-enthusiastic as spot trading activity started off on a slow note in February. Market participants are hopeful the downstream market has the potential to pick up by end-February, if barrels are pulled into Singapore to replenish stocks and meet bunker demand in the East.
With China going into a one-week Lunar New Year holiday from Feb. 11, vessels that normally call at Zhoushan and Shanghai are likely to call at neighboring ports in the region, increasing demand for HSFO bunker fuel. Bunker demand in Zhoushan was heard mixed early February.
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Source : S&P Global
