- LSFO volumes have jumped to make up 15% of the overall total for October.
- HSFO sales just a little over six weeks away, falling 16% to 2,776.300 mt.
- The overall sales total instead of HSFO’s more usual 90%+ and is the lowest HSFO sales total on record that dates back to January 2013.
- Spot supplies of HSFO and LSFO) are drying up in Singapore as more buyers turn to term contracts ahead of the global implementation of the IMO 2020 sulphur cap.
According to an article published in Ship and Bunker news, in what are the first concrete signs of IMO2020 shaking up the bunker sales product mix in Singapore.
Increase in LSFO volume
- LSFO volumes have jumped to make up 15% of the overall total for October, while HSFO sales have fallen to their lowest in many years.
- Sales of LSFO – reported as 180 CST and 380 CST material – had totaled 173,500 mt in September and represented just 4% of the overall total. For October the sales volume jumped to 569,900 mt.
Status of HSFO sales
- HSFO sales, reported as 180 CST, 380cSt, and 500cSt material, also reflected the fact that the start of IMO2020 is just a little over six weeks away, falling 16% to 2,776.300 mt
- This represented just 74% of the overall sales total instead of HSFO’s more usual 90%+, and is the lowest HSFO sales total on record that dates back to January 2013 when MPA first began reporting 500cSt sales in their own category.
- Sales of the industry’s most popular marine fuel, 380cSt bunkers, for October fell to 2,255,700 mt, the lowest on records dating back to January 2011.
- In total, the port reported sales of 3,767,700 mt for all products in October, down from 4,125,200 mt sold during the month in 2018.
Spot supplies dry up
Spot supplies of high-sulphur fuel oil (HSFO) and low-sulphur fuel oil (LSFO) are drying up in Singapore as more buyers turn to term contracts ahead of the global implementation of the IMO 2020 sulphur cap.
Most shipowners have not installed scrubbers and are instead planning to burn whatever HSFO supplies they still have onboard their vessels by Christmas at the latest.
“We buy less HSFO on spot these days, as most of our bigger vessels were filled up recently before the persistent prompt constraints in Singapore“, one buyer said.
Singapore prompt supplies of HSFO started to tighten significantly in July as the market adjusted to the IMO rules, which will cap sulphur content in marine fuels at 0.5pc on 1 January, down from 3.5pc now.
Supply availability of bunker premiums
Delivered bunker premiums have stayed elevated levels on concerns about supply availability in Singapore, the world’s largest bunker port. The premium of delivered 380cst HSFO to cargo prices has averaged $81/t so far in November, a tenfold increase from the average premium in the first six months of this year, according to Argus data.
“The switchover is making it difficult to optimize barges, and the few players that still have HSFO in storage tanks and are able to deliver it are basically determining prices and earning very good margins. Prices have not yet come down in line with fundamentals“, a trader said.
Ripple effect felt in other markets
The tightness in the HSFO market in Singapore has also affected other ports in Asia, with several Chinese ports struggling with terminal and barge congestion. Delivered HSFO in Shanghai, Zhoushan and Hong Kong has averaged a $41/t, $24/t and $15/t premium to Singapore so far this month, Argus data show.
Some shipowners have instead sought to bunker in Fujairah, where HSFO bunker prices are nearing a $100/t discount to Singapore, mainly as a result of abundant regional supplies.
Strong demand for LSFO
Demand for LSFO has picked up strongly in Singapore since early October. Consumption is no longer limited to those using the fuel for testing purposes or voyages to China’s emission control areas (ECAs). Owners have instead started cleaning out their tanks in earnest and are now consuming larger sized LSFO stems for longer journeys.
A growing share of LSFO demand is being met by supplies that were earlier locked in on a term basis, with fewer owners willing to buy on the spot market. “One must be mad to buy LSFO on the spot market“, said one buyer, referring to the higher prices of spot supplies.
This trend will intensify further in the coming months, as shipowners grow increasingly concerned about LSFO availability beyond the first quarter of 2020. This will lead buyers to tie up the majority of their requirements for IMO-compliant fuels through term contracts for the second quarter and beyond.
LSFO term contracts
Owners have agreed on term contracts for LSFO until March at discounts of around $40-50/t to gasoil cargo prices. Spot prices for LSFO have averaged a discount of $30/t to delivered low-sulphur marine gasoil (LSMGO) so far in November, according to Argus data. “Since quite a few barges are still getting cleaned and are not in service yet, some LSFO stems for prompt delivery have been sold at discounts of up to $15-20/t to LSMGO after trading hours“, another trader said.
“The majors have been locking in the term in order to secure volume, which we have done too, but we have made sure to have some HSFO and LSFO spot barrels for sale as well in order to enjoy these high premiums“, a supplier said.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Ship&Bunker&ArgusMedia
