What Keeps Pressure Off HSFO Premiums Despite China Restocking?


  • Thin competition is likely to slow down declines in 380 CST high sulfur fuel oil bunker premiums.
  •  Prices are expected to soften amid waning cash differentials for Singapore 380 CST HSFO and sluggish demand.

A recent news article published in the Platts states that thin competition likely to keep pressure off HSFO premiums despite China restocking.

Platts Shanghai-delivered 380 CST HSFO bunker premium

Platts Shanghai-delivered 380 CST HSFO bunker premium over the grade’s benchmark cargo assessments slipped to average $164.16/mt June 1-10 from $195.03/mt in May, according to S&P Global Commodity Insights data.

Shanghai’s delivered HSFO bunker premiums last peaked at $209.13/mt May 13, the highest since since S&P Global started assessing the grade on Nov. 2, 2009.

“Zhoushan and Shanghai ports should face no lack of HSFO bunkers towards the end [of June],” a local trader said June 13.

Three shipments totaling 865,691 barrels, or 136,329 mt, of HSFO are scheduled to arrive at Zhoushan and Ningbo ports during the week that began June 12, the first replenishment stocks since the last arrival on May 14, according to Kpler shipping data.

“HSFO supply is not an issue … Bunker premiums are coming off steeply [in June] compared to levels seen in May,” according to a source from a shipping company, as suppliers were seen actively offering in the spot market since June.

HSFO stockpile is expected to raise inventories

While the HSFO stockpile is expected to raise inventories, the lukewarm demand is also likely to pressure delivered and ex-wharf bunker premiums, local traders said.

“There are only few spot inquiries [for HSFO bunkers]… Demand is quite limited and stagnant,” a Zhoushan-based bunker supplier said June 13.

“Supposedly, HSFO bunker premiums in China would be affected by the [weakening] cash differentials in Singapore, but we are likely to see a delayed impact as there aren’t many HSFO players in Zhoushan and Shanghai,” a Shanghai-based bunker supplier said June 13.

China supplements HSFO volumes with imports from Singapore and the Middle East, according to local traders.

Limited competition to curb softening of premiums

HSFO bunker markets in Shanghai and Zhoushan, however, is mostly confined to only handful of suppliers compared to the much fiercer competition in the low sulfur fuel oil market, sources said.

“Due to the lack of competition, fresh [HSFO cargo] arrivals may not lower China’s HSFO premiums very quickly or change the situation immediately,” the Shanghai-based bunker supplier also said.

The Shanghai-based bunker supplier also said that HSFO stockpiles remain lean in the meantime until the replenishment cargoes start to arrive from mid-June onwards.

“Suppliers stock and sell HSFO on a much smaller scale [compared to LSFO], because margins are slimmer… There are only few bunker inquiries and few suppliers too, so it would be problematic to import more HSFO than required,” the first bunker supplier also said.

The spread of Shanghai-delivered marine fuel 0.5%S versus HSFO, or Hi-5 spreads, surged to fresh all-time highs since June 2 to $430/mt June 9 and June 10, from a near seven-month low of $70/mt May 4, S&P Global data showed.

Platts started assessing Shanghai-delivered marine fuel 0.5%S from July 1, 2019.

The 380 CST HSFO cash differential to Mean of Platts Singapore strip slipped to average minus 52 cents/mt June 1-10 from $7.28/mt in May, S&P Global data showed.

Rising inflows from Russia and the Middle East pushed the 380 CST HSFO cash differential into negative territory at minus $1.42/mt May 27, the first time since Jan. 18, the data also showed.

S&P Global previously reported, citing traders in Singapore, that the tepid demand and an incremental stockbuild to the tune of 1.5 million-2.5 million mt for May and June inventories from April is likely to pressure premiums.

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Source: Platts


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