- Bunker premium lowest since July, outlook subdued.
- Barging spread halved from Oct.
- LSFO flows to replenish stocks.
Around the world’s largest bunker hub of Singapore, ample low sulfur fuel oil stockpiles, lagging demand and stiff competition progressively weighed on downstream valuations, leading market participants to moderate previously stronger sentiments for the near term, reports Platts.
No year-end spike in demand
Platts, part of S&P Global Commodity Insights, assessed the Singapore-delivered marine fuel 0.5%S bunker premium over the benchmark FOB Singapore Marine Fuel 0.5%S cargo at a four-month low of $14.30/mt Nov. 18, down $1.54/mt on day.
The LSFO bunker premium was last assessed lower at $11.33/mt July 19 and averaged at $17.64/mt from November to date, softening from the October average of $22.35/mt, Commodity Insights data showed.
“The expected year-end spike in demand didn’t quite happen, it’s still possible to find prompt [barge] slots in the market,” a Singapore-based trader said Nov. 19, noting the tighter product and barge availabilities had also pushed bunker premiums higher in the fourth quarter of 2023.
Late in the fourth quarter of 2023, escalations in Red Sea geopolitical tensions, which spurred shipowners to detour around the Cape of Good Hope, had contributed to some incremental bunker demand around Singapore hub.
“LSFO [bunker] demand might have picked up in November [from] October following the drop in premiums, [but] at the same time, some demand was being lost to China and Malaysia as viable alternative [supply] locations too,” the first trader said.
Apart from regional competition, buyers also expect to fix requirements for late-November or early-December stems around high-single digit premiums, further depressing the LSFO market.
“Outlook for December looks bleak, there’s lots of forward LSFO inquiries but not serious buyers,” a second third trader said.
Meanwhile, traders also anticipate measurable pressure on December’s term contract LSFO ex-wharf valuations, as downstream suppliers with ex-wharf requirements are cautious of procuring cargoes at elevated premiums, which further narrow profit margins.
Spreads between Singapore’s delivered marine fuel 0.5%S and the corresponding ex-wharf grade, also known as barging spreads, narrowed to average $4/mt Nov. 1-18, from $8.36/mt across October, according to Commodity Insights data.
Supply buoyed
Although downstream LSFO demand in Singapore were recently seen to be holding moderate levels, this has lagged the broader supply situation, where traders anticipate buoyed stockpiles towards late-November through early-December too.
“Seeing that LSFO stocks are getting heavy especially surrounding end-November and early-December [period],” a fuel oil trader said Nov. 19, adding that China’s import demand could lift some supply pressure off Singapore hub.
Traders mostly expect LSFO flows from the West to range around 2.6 million-2.8 million mt, largely steady from October’s estimates, amid viable East-West arbitrage margins, Commodity Insights previously reported.
Recently, a cargo of approximately 130,000 mt of LSFO for Nov. 23-24 loading from Kuwait’s Al-Zour refinery, sold via a spot export tender and reportedly closed around minus $6.50/mt to Mean of Platts Singapore Marine Fuel 0.5%S assessments, is expected to land around Singapore hub in December.
Singapore’s commercial stockpiles of heavy distillates rose for the second consecutive week due to the strong import rebound, rising 1.8% week on week to 18.349 million barrels in the week ended Nov. 13, the latest Enterprise Singapore data showed.
The M1/M2 intermonth spread for Singapore marine fuel 0.5%S swaps narrowed to an average of $8.27/mt across Nov. 1-18, a narrower backwardation from the $10.20/mt across October, Commodity Insights data showed.
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Source: Platts
