- Short-Term Surge in Zhoushan LSFO Likely to Fade in Q2.
- China’s Fuel Oil Export Quotas Could Cap Zhoushan LSFO Prices.
- LSFO Premiums Rise in Asia as Supply Dynamics Shift.
The Shanghai- vs. Zhoushan-delivered low sulfur fuel oil (LSFO) price spread against the same grade delivered in Singapore increased to $14/mt on April 7, the highest in more than three months. Tighter barging availability at Chinese ports drove the widening. The spread between these major Asian ports had turned into a $2/mt premium on April 4, following remaining largely at a discount since mid-January. Based on Platts data, it was last valued higher on December 30, 2024, at $18/mt. Platts is owned by S&P Global Commodity Insights, reports S&P Global.
Barge Congestion at Zhoushan Pushes Spot Offers Higher
Stricter barging availability and congestion in Zhoushan pushed spot offers higher for the week ending April 4. This came after weeks of miserable weather, which interrupted regular operations.
Certain market participants mentioned that anchorage spaces surrounding Zhoushan have been processing a backlog of vessels, as limited anchorage points are available for bunkering. But the disruption might soon be over. Others noted that barging operations have mostly returned to normal, which implies that the supply bottleneck might be short-lived.
Zhoushan Premium Over Singapore Surges in Early April
Between April 1 and April 7, Platts valued Zhoushan-delivered 0.5%S marine fuel bunker at an average premium of $12.62/mt against the benchmark FOB Singapore 0.5%S marine fuel cargo price. This was a sharp increase from the March average of $3.44/mt.
Despite this recent increase, the longer-term trend is muted. Market players expect LSFO spot prices at Zhoushan to weaken in the second quarter, particularly against the backdrop of China’s recent issuance of a second batch of fuel oil export quotas of 5.2 million mt towards the end of March. “I think even for Q2, spot prices will still be relatively low,” a local bunker supplier said.
April Production to Fall Slightly as Refinery Maintenance is Scheduled
Though China’s LSFO output is anticipated to fall slightly in April on the back of scheduled refinery maintenance, production will probably remain above the 1 million mt threshold, a JLC analyst has estimated. Data from domestic information provider JLC indicates that China’s LSFO output in March fell 19.9% year on year and 2.17% month on month, at 1.125 million mt.
Singapore Premium Rangebound Amid Sufficient Supply
Singapore, the world’s biggest bunker port, is well-stocked with delivered 0.5%S marine fuel. Cargo availability remains in line with demand, and the delivered premium over FOB Singapore values remains in a consistent range.
Platts assessed the Singapore-delivered LSFO premium at between $8.91/mt and $12.75/mt over April 1-7. This is compared with a range of $7.13/mt to $12.89/mt in March.
Mixed Demand as Buyers Respond to Crude Volatility
Demand in Singapore has seen a modest pick-up, although buyer sentiment remains cautious. The recent slump in crude oil prices prompted some of the buyers to take cover at lower levels to meet their bunker requirements.
Buying interest picked up in early April. Others, however, sat on the sidelines, waiting for further downside action in the larger fuel oil complex, led in large part by upstream crude.
Singapore Supply Overhang Expected to Shrink
The Singapore LSFO supply surplus is expected to decrease in April, with far fewer arbitrage arrivals than in March. The arbitrage window was mostly closed during the last month, and this may lead to a drawdown in Singapore’s inventories, market sources said.
But with Zhoushan’s barging capacity and supply levels returning to normal, the recent lull in regional pricing competition might not be long-lasting. Increasing competitive bunker offers from China may soon put downward pressure on the Singapore LSFO market.
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Source: S&P Global
