Tightening supply-demand dynamics in the world’s largest bunkering hub of Singapore have supported premiums of the downstream low sulfur fuel oil grade to climb to six-month highs in August, owing to thinning stockpiles due to delayed cargo arrivals coupled with issues in blending the fuel oil feedstock, reports S&P Global.
Tight Inventory
The Singapore-delivered marine fuel 0.5%S bunker premium over the benchmark FOB Singapore Marine Fuel 0.5%S cargo averaged $24.54 per metric ton month-to-date in August, higher than that of July that had been assessed at $14.48/t and June that was at $10.72/t, according to the Platts assessments by S&P Global Commodity Insights.
Platts most recently assessed the premium at $38.92/t on Aug. 27, hitting a six-month high with it last assessed higher at $40.27/t on Feb. 2, Commodity Insights data showed.
“[The tightness in LSFO is expected to continue] likely whole of September … due to lack of component to blend the sulfur down,” a local bunker trader said.
“I heard [they are using] gasoil for FO blending,” another trader said.
Amid the tight inventories, bunker fuel suppliers have diverted attention to fixing stems with laycans that are further out from Sept. 9 onward.
Some major suppliers are also faced with delayed upstream cargo arrivals, resulting in short-term tightness, with bunker fuel suppliers only expecting the situation to potentially ease in second-half September. Demand has been steady with local suppliers noting a stable stream of inquiries.
Spreads To Narrow
Singapore’s bunker fuel suppliers were concerned of losing demand to other regional bunkering ports.
“I foresee many [inquiries] in the market floating here and there getting postponed, shifting port call for bunkers as some prices are impossible to fix at, considering the situation in Singapore,” a third local bunker trader said.
“Some clients advised if SG is too expensive they could always take it at China, at their load/discharge port … by right Singapore should be cheaper but because ex-wharf premium all went up, in the end, the price offered in SG makes no difference to take elsewhere,” a fourth Singapore-based bunker trader said.
However, the current record-low discount levels in north Asia could start to narrow due to tightening LSFO supplies there.
China’s Zhoushan and Shanghai, the two most competitive ports in the region, have seen delivered LSFO premiums to the same delivered grade in Singapore averaging discounts of $5.11/t and $3.61/t, respectively, month-to-date in August.
This could soon reverse as China’s fuel oil export quotas are close to being depleted and at least one major domestic refiner has begun cutting back monthly production volumes since August, market participants said.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: S&P Global
