- LSFO bunker premium lowest since July 2024.
- Barging spreads near 5-month low.
- Zhoushan’s discounts versus Singapore widen.
Downstream low sulfur fuel oil premiums around the world’s largest bunker hub of Singapore have come under pressure as sellers moderate their initially stronger demand expectations following the Lunar New Year festival lull, stirring more competition and narrowing profit margins, reports Platts.
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 near seven-month low of $10.48/mt Feb. 13, down 44 cents/mt day over day.
Singapore hub sees stronger demand fundamentals
Singapore’s LSFO bunker premium was last assessed lower at $10.22/mt July 17, 2024.
Demand gains were only seen late in the week of Feb. 10-14 amid softer international crude oil prices, but competitive selling activities still presented downsides to LSFO delivered premiums.
Prior to the Lunar New Year holidays, traders around the Singapore hub saw stronger demand fundamentals as buyers advanced their LSFO requirements, eventually tightening barge availabilities for prompt slots and lending valuations some degree of support.
However, on the back of leaner subsequent demand, LSFO barging schedules progressively eased with more suppliers able to offer out stems for as early as within three to seven-day lead times.
In comparison to the slumping delivered market, LSFO ex-wharf offer levels for balance-month February and March barrels were relatively steadier in comparison, tracking the rather stable upstream cash premiums, which have been trickling lower at a more gradual pace.
Spreads between Singapore’s delivered marine fuel 0.5%S and the corresponding ex-wharf grade, also known as barging spreads, most recently narrowed to a five-month low of $1/mt Feb. 12 before inching up slightly to $2/mt Feb. 13, and was last assessed lower at $1/mt Sept. 25, 2024, according to Platts data from Commodity Insights.
Suppliers’ margins from downstream LSFO deliveries also crunched, with barging spreads averaging $5.11/mt Feb. 3-13, below $7.25/mt across January and $6.62/mt in December.
Previously, premiums for February’s term ex-wharf marine fuel 0.5%S barrels were mostly concluded at around $9-$12/mt to the benchmark FOB Singapore marine fuel 0.5%S cargo values, while recent offers softened slightly and hovered closer to $8-$10.50/mt premiums, traders said Feb. 14.
According to traders, initial offers for March’s term ex-wharf LSFO barrels were recently around $9-$11/mt premiums, about rangebound for February’s premiums.
Upstream valuations capped
Despite traders’ expectations of around 1.6 million-1.7 million mt of LSFO from the Western Hemisphere flowing toward Singapore, which was down from 1.8 million mt for January, replenishment flows from Brazil and nearby Southeast Asian refineries through H2 February and early March may keep inventories adequate for the near term.
Singapore’s commercial stockpiles of heavy distillates rose 4.3% week over week to 20.1 million barrels as of Feb. 12, rising for the second consecutive week amid a jump in imports, Enterprise Singapore data showed late Feb. 13.
The FOB Singapore Marine Fuel 0.5%S cargo’s cash differential to the Mean of Platts Singapore Marine Fuel 0.5%S strip assessment touched an over four-week low of $5.33/mt Feb. 13, down 34 cents/mt day over day, Commodity Insights data showed.
Moreover, traders foresee stiffer regional competition, such as against North Asia’s bunker hub of Zhoushan, where a gradual recovery in spot trading activity could see suppliers offering LSFO aggressively to make up for sales shortfalls during the extended Lunar New Year holidays.
Platts data from Commodity Insights showed that price spreads of Singapore’s delivered marine fuel 0.5%S bunker versus the same delivered grade at Zhoushan have progressively widened to an average of $8/mt from February to date, from $2.80/mt in January and minus $26.43/mt across December.
This LSFO bunker spread between the two hubs most recently rose to a near five-month high of $14/mt on Jan. 24, before narrowing to $4/mt Feb. 13.
Currently, the Singapore hub has 40 licensed bunker suppliers as of Feb. 3, after the Maritime Port Authority released a circular dated Jan. 20 stating the termination of Sentek Marine & Trading Pte Ltd.’s licenses as a bunker supplier and bunker craft operator.
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Source: Platts
