Prices of very-low sulphur fuel oil (VLSFO) bunkers in Singapore on the spot market have been in a wide range of up to $30/t, depending on delivery dates, because of tightness in the cargo market, according to Argus data, reports Manifold Times.
Demand for VLSFO
VLSFO bunkers for delivery in May were priced up to $970/t on 23 May, while deliveries for the end of the first week of June were reported at around $940/t.
VLSFO cargo supplies in Singapore are expected to be tight up until around mid-June, according to market participants, with low-sulphur residual inflows to Singapore from the west of Suez and Asia-Pacific being around just 1.5mn-1.8mn t in May. This is lower than the approximate 2.5mn t/month average last year, because of a steep backwardation in Singapore making the arbitrage from the west of Suez unviable.
The Singapore balance May-June 0.5pc sulphur marine fuel backwardation was also estimated at around a steep $40.50/t on 23 May, at the close of the afternoon online trading window. The June-July backwardation also rose to $38/t yesterday, reaching record highs since Argus began assessments in November 2019.
Fuel oil inventories had fallen sharply
Low-sulphur residual inflows to Singapore had previously been depressed in March and April, averaging about 2mn t/month or slightly above that, because of Russian supply losses tightening supplies in Europe and the US, and consequently flows to Singapore, according to traders and analysts.
Singapore’s onshore residual fuel oil inventories had fallen sharply to over two-year lows of 17.456mn bl in the week to 11 May, according to Enterprise Singapore data, before edging up to 18.77mn bl in the following week.
Widening range
A wide range in delivered bunker prices in Singapore is considered unusual ever since the mandatory introduction of mass flow meters (MFMs) came into effect from 1 January 2017 for all marine fuel oil grades. By measuring the fuel delivered on the ship based on mass instead of volume, suppliers have less of a margin to charge different prices to the consumer. As a result, the range of bunker prices is typically not more than $4-5/t.
Supply tightness in the market in a high outright price environment, with crude price volatility during the trading session, could explain why prices are now diverging.
The premium of delivered VLSFO over the cargo price has as a result risen to yearly highs, and was assessed at $75/t on 20 May, according to Argus data. Typically, the delivered premium is around $10-15/t.
Singapore is the world’s largest bunker hub, with nearly 50mn t of bunker fuel supplied in 2021, according to data from the country’s Maritime and Port Authority (MPA).
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Source: Manifold Times
