Tightening Supply-Demand Dynamics Push Singapore LSFO Premium to Six-Month Highs
Tightening supply-demand dynamics in the world's largest bunkering hub of Singapore have supported premiums of the downstream low sulfur fuel oil (LSFO) 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.
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 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 a 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.
Shipowners Eye Neighboring Ports for Bunker Calls
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 literally impossible to fix at, considering the situation in Singapore,” a third local bunker trader said.
“Some client 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.
“This year, the market knows that [there is not much left of the current batch of] the export quota much earlier [on], so they are going to hike imports from the likes of Singapore, Japan or South Korea. I think in Q4, even though the domestic refineries are going to reduce [production], but the import volume may increase,” a local bunker supplier said.
At least two major Hong Kong-based bunker suppliers said they were currently short of supplies and waiting for cargoes.
A Shift in the Bunkering Landscape
The recent developments in the LSFO market in Singapore, with the premium reaching six-month highs, are indicative of a broader trend in the bunkering landscape. As the industry faces evolving regulations and environmental concerns, the availability and pricing of bunker fuels are becoming increasingly important considerations for shipowners.
The potential shift in bunkering patterns, with shipowners exploring alternative ports due to high prices in Singapore, could have significant implications for the industry. It highlights the need for bunker fuel suppliers to be agile and adapt to changing market dynamics. Furthermore, the tightening of LSFO supplies in various regional ports underscores the growing importance of efficient supply chains and reliable sourcing strategies.
This situation also underscores the need for continued collaboration and communication within the bunkering industry to ensure a stable and transparent market for shipowners. The future of bunkering will likely be characterized by increasing complexity, making it crucial for all stakeholders to stay informed and proactive in navigating these evolving challenges.
