The global bunker fuel market, centred in Singapore, is experiencing significant disruptions as tensions in the Red Sea prompt ships to reroute, causing increased demand for low-sulphur fuel. This surge in demand is leading to longer waiting times and higher prices, impacting the industry.
Increased Demand Spurs Supply Challenges
Shippers and trading firms are encountering delays and rising costs for low-sulphur fuel in Singapore, the world’s primary bunker hub. Vessels diverge from the Red Sea, contributing to heightened demand for refuelling and tightening the availability of shallow sulphur fuel oil (VLSFO) slots.
Bunker Premiums Surge Amid Tightened Supply
The strain on bunker barges supplying VLSFO has led to a doubling of wait times for slots, reaching around two weeks. Bunker premiums for VLSFO in Singapore have surged to over $30 per metric ton, driven by the increased demand and scarcity of slots for prompt delivery dates.
Impact of Red Sea Tensions on Market Dynamics
Ships rerouting due to Red Sea tensions have reshaped refuelling patterns, creating demand surges at various ports, including Mauritius and South Africa. The wider impact is reflected in the altered dynamics of the bunker fuel market, with potential ramifications for established hubs like Singapore and Rotterdam.
Price Spreads Reflect Market Shifts
The price spread between delivered and ex-wharf bunker fuel has significantly widened, indicating changing market conditions. This shift, from around $10 in early January to $20 per ton in late January, signifies increased barge margins and highlights the evolving dynamics in the bunker fuel industry.
In summary, escalating tensions in the Red Sea are reshaping global bunker fuel dynamics, causing disruptions in Singapore’s market with longer wait times, rising premiums, and notable shifts in pricing structures.
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Source: Reuters
