Tepid demand for low sulfur fuel oil at the world’s largest bunker hub of Singapore, amid lean volumes of inquiries from end-users, is expected to pinch downstream margins, with ex-wharf valuations also remaining buoyed, traders said Oct. 20, reports Platts.
Higher purchasing costs of LSFO
Higher purchasing costs of LSFO ex-wharf cargoes have been narrowing suppliers’ margins derived from bunker deliveries, while downstream competition heats up amid limited demand, local traders said.
Spreads between delivered and ex-wharf Singapore marine fuel 0.5%S bunkers, or the barge spread, have slumped to average $1.34/mt in Q4 so far through Oct. 19, trending down from $4.33/mt in the third quarter and $7.33/mt in Q2, according to data by S&P Global Commodity Insights.
The barge spread has averaged $3.79/mt since H2 2023 through Oct. 19, a 47% drop compared with the first half of the year, S&P Global data showed.
Ideally, barge spreads are estimated at around $5-10/mt to adequately offset operational costs for downstream bunker deliveries, according to industry sources.
“Market’s very tough. We dropped offers but still lost the deal. Currently, LSFO ex-wharf prices [for October and November] don’t make sense in current market conditions. Delivered [premiums] aren’t even close to $20/mt,” a Singapore-based bunker supplier said Oct. 20, adding that delivered deals were even heard fixed around single-digit premiums.
Singapore’s term contract ex-wharf marine fuel 0.5% barrels for October supply were previously concluded around premiums of $10-15/mt to the benchmark FOB Singapore marine fuel 0.5% cargo values, just slightly above the $10-14/mt premiums traded for September-loading cargoes, S&P Global previously reported.
Slump in exports
More recently, LSFO ex-wharf cargoes for balance-October loading were offered around $16-22/mt, whereas initial offers for November’s term ex-wharf supply ranged around $18-24/mt premiums, traders said Oct. 20.
This was despite adequate LSFO stocks in Singapore, as suppliers raise offers in tandem with the stronger upstream cargo valuations, traders also said.
Commercial heavy distillates stockpiles in Singapore climbed 7.9% on the week to 19.39 million barrels in the week ended Oct. 18, amid a slump in exports, according to the latest Enterprise Singapore data released Oct. 19.
“We were recently sourcing for some LSFO ex-wharf cargoes, but suppliers mostly either cited limited supplies or offers were too high,” a Singapore-based trader said Oct. 20, referring to prompt-loading cargoes for balance-October’s supply.
Cash differentials for Singapore marine fuel 0.5% cargoes to the Mean of Platts Singapore Marine Fuel 0.5% assessments jumped to average $16.81/mt Oct. 2-19, from $6.45/mt across September, according to data by S&P Global.
Near-term outlook bumpy
Although the outlook for Q4 bunker demand would typically remain buoyant during the peak shipping season, the monthly downtrend in recent months capped overall expectations for October, especially as the recently climbing international crude oil prices have prompted buyers to remain on the sidelines and limit requirements, dampening demand since the second half of October, bunker suppliers said.
“LSFO demand is tepid and too thin, the low delivered premium versus the ex-wharf offers illustrate a widening disconnect,” a second Singapore-based trader said Oct. 20.
Earlier in September, sales of the International Maritime Organization-compliant bunker, inclusive of the bio-blended grade, marked a second month of consecutive decline to the lowest since June, totaling 2.498 million mt, a 2.5% drop on the month but 1.35% higher on the year, according to the latest preliminary data from the Maritime and Port Authority of Singapore.
“LSFO demand has been poor,” a second Singapore-based bunker supplier said Oct. 20, adding that sellers are willing to offer competitively ever more than before to capture deals, with inquiry volumes having thinned across most of the week ended Oct. 20.
From a day-to-day basis, some traders cited “unstable” demand volumes in the LSFO market in the last couple of months, whereas flows were seen relatively more consistent in the high sulfur fuel oil space.
The Platts Singapore-delivered marine fuel 0.5% bunker premium to benchmark FOB Singapore Marine Fuel 0.5% cargoes inched down to average $15.13/mt Oct. 16-19 from $15.33/mt across Oct. 9-13, according to data from S&P Global.
This bunker premium was assessed $3.79/mt lower on the day at $13.48/mt Oct. 19, S&P Global data also showed.
“The ex-wharf and delivered market don’t make much sense…Margins are simply covered by barging costs. There are also not many inquiries when crude is up these days,” a third bunker supplier said.
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Source: Platts
