- Downstream competition pressures valuations
- UAE’s price discounts versus Singapore spreads widen
Term contractual ex-wharf 380 CST high sulfur fuel oil at the UAE’s bunker hub of Fujairah for August were inked at premiums of around $6-$8/mt to Mean of Platts Arab Gulf 180 CST HSFO assessments, traders said Aug. 6, as some sellers were keen to draw down stockpiles, reports SP Global.
Downstream competition
The downstream competition in the UAE’s bunker market has put significant pressure on valuations for high-sulfur fuel oil (HSFO). For August, term contracts for 380 CST HSFO at the UAE’s Fujairah hub were concluded at premiums of approximately $6-$8/mt over the Mean of Platts Arab Gulf 180 CST HSFO assessments. This is a decline from July’s higher premiums of $8-$15/mt, as some sellers in Fujairah sought to reduce their stockpiles amid increasing competition.
Traders noted that August HSFO ex-wharf cargoes saw premiums in the low teens, a decrease compared to the previous month. The Platts-assessed premium for Fujairah-delivered 380 CST HSFO compared to FO 380 CST 3.5% FOB Arab Gulf cargoes dropped from an average of $31.79/mt in June to $25.37/mt in August. This decline reflects the heightened competition in the region.
Local suppliers reported aggressive pricing strategies to capture substantial inquiries, with some sellers offering significantly lower premiums to outbid competitors. This competitive pressure has led to a situation where even prompt refueling dates were secured at low premiums. Additionally, downstream barging schedules have been relatively prompt, with lead times from same-day to three days, facilitating quick refueling.
In terms of supply, the Fujairah hub has maintained adequate HSFO inventories, bolstered by recent inflows including cargoes from Iran and Russia. Stockpiles of heavy residues used for power generation and ship fuel increased by 3% to 9.702 million barrels in late July. Despite the peak summer season boosting HSFO consumption, the market has balanced demand and supply since July.
The competition in Fujairah has led to a widening price spread compared to Singapore. As of July 30, the spread between Singapore-delivered marine fuel 0.5%S prices and those at Fujairah reached a four-month high of $27/mt before narrowing to $18/mt by August 5. The average spread in early August was $19.33/mt, up from $15.52/mt in July. This widening spread reflects the competitive pressures faced by UAE suppliers and the resulting impact on market dynamics.
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Source: SP Global
