- The price difference between low-sulfur fuel oil (LSFO) and high-sulfur fuel oil (HSFO) in Singapore narrows due to slower LSFO demand.
- Cost savings from scrubber investments declined 12% year-on-year, though the spread remains viable for future installations.
- Geopolitical tensions and ample LSFO supplies impact demand dynamics, while HSFO sees steady support from longer trade routes.
Singapore’s Hi-5 spread a key metric for fuel oil pricing, has narrowed to its lowest level in five months, signaling reduced demand for low-sulfur fuel oil (LSFO) amid ample supply and weaker market conditions. This development reflects shifts in global shipping and geopolitical landscapes, raising concerns about cost efficiencies for shipowners relying on scrubber technology, reports SP Global.
Hi-5 Spread Reaches Five-Month Low
Higher inflows of LSFO cargoes into Singapore, facilitated by workable East-West arbitrage margins, have led to abundant supply and falling prices. As of November 26, the Hi-5 spread dropped to $94.09/mt, the narrowest since June, driven by:
- Slower bunker demand due to Asia’s weaker economic growth outlook.
- Geopolitical tensions, particularly the Iran-Israel conflict along the Red Sea.
Additionally, delivered LSFO premiums fell to a three-month low, reflecting reduced demand across major ports.
Implications for Scrubber Cost Savings
The 12.3% year-on-year drop in Hi-5 spread, averaging $129.64/mt in 2024, highlights declining savings from scrubber installations. Despite this, shipping companies see the current spread near $100/mt as sufficient to justify scrubber retrofitting for long-term cost efficiencies.
“We’re fitting more vessels with scrubbers in 2025,” said a shipping company source, emphasizing the technology’s sustained economic appeal.
HSFO Demand Steady Amid Geopolitical Risks
Demand for high sulfur fuel oil (HSFO) remains robust, bolstered by longer trade routes as vessels avoid the Red Sea amid geopolitical tensions. This trend supports upstream HSFO valuations, with term contracts driving consistent demand in Singapore.
Moreover, traders anticipate potential market shifts in 2025 tied to Donald Trump’s possible return as US president and its implications for the Russia-Ukraine war, which could further impact HSFO dynamics.
Market Outlook and Concerns
Industry sources expect LSFO stocks in Singapore to remain elevated into December, with arbitrage arrivals of over 600,000 mt sustaining supply.
However, traders report a lack of significant inquiries for December cargoes, raising concerns about future demand trends.
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Source: SP Global
