Singapore's fuel oil imports from the Middle East unlikely to rise in May on high freight rates, inventoriesMay 4
Delivered Marine Fuel 0.5%S bunker fuel premiums at the port of Hong Kong has rebounded from the all-time low of 89 cents/mt last month as shipowners opt to take bunker fuel from the port given its attractive valuations instead of the bunkering hub of Singapore, which is still reeling from the after effects of Ocean Bunkering Services' abrupt exit from the market.
However, the demand shift to Hong Kong may come to an end soon as shipowners are sufficiently stocked up for the coming weeks, market sources said.
Hong Kong delivered Marine Fuel 0.5% bunker differential to the benchmark Singapore Marine Fuel 0.5% cargo has inched progressively higher after hitting an all-time low of minus 89 cents/mt on April 17 to $26.08/mt in the two weeks ended April 30, Platts data showed. On Tuesday, Platts had assessed the delivered Hong Kong grade at $240/mt, a premium of $21.33/mt to Singapore Marine Fuel 0.5%S cargo assessments.
Hong Kong delivered Marine Fuel 0.5% bunker prices averaged $228.24/mt, or $7.47/mt lower than the same delivered grade in Singapore for the month of April, Platts data showed.
Delivered marine fuel prices in Hong Kong typically trade at a premium to that of the same grade in Singapore as most, if not all, of its demand is met by imports from the city-state.
Hong Kong delivered Marine Fuel 0.5% bunker prices, on an average, have traded at a premium of $7.70/mt over that of Singapore in March, down from $9.98/mt in February, Platts data showed.
The combination of lackluster demand and ample supply had pressured Hong Kong Marine Fuel 0.5% bunker prices lower in recent weeks, market sources said, explaining why Hong Kong's delivered prices dipped below that of Singapore.
"Demand is [better] but maybe 80% of [pre-coronavirus outbreak] volumes," one supplier said about the recent uptick in demand.
Market participants noted that suppliers in Hong Kong have had to incur a loss at these relatively lower prices, but they are under pressure to sell their inventory before a deadline to avoid terminal charges.Meanwhile, the unexpected exit of Ocean Bunkering Services, the bunkering arm of embattled oil trader Hin Leong, from the Singapore bunker fuel market has propelled prices of delivered 0.5%S marine fuel at the port substantially higher last month.
The third largest bunker supplier by volume in 2019, OBS has been selling about 500,000 to 700,000 mt/month of bunker fuel in Singapore, whose monthly average bunker fuel sales stand at 4 million mt .
OBS had cancelled its bunker fuel deliveries from April 18 onwards, S&P Global Platts reported previously, and since then, shipowners have been looking for replacement inventories from the spot market.
"This week, shipowners should have mostly covered their spot requirements, but there are some that need to cover their contract volumes that they fixed with OBS earlier. For May, they will likely be looking for spot inventories to cover, but for later months, they will be negotiating new contracts,” a Singapore-based bunker supplier said.
Against this backdrop, Singapore delivered Marine Fuel 0.5%S bunker premium to the benchmark FOB Singapore Marine Fuel 0.5%S cargo assessments, which had plunged to an all-time low of $7.39/mt on April 9, rose to an eight-week high of $36.07/mt on April 30. On Tuesday, Platts had assessed the delivered grade at $247/mt, a $28.33/mt premium to Singapore Marine Fuel 0.5%S cargo assessments. Market sources have attributed the declining premium to an increasing number of shipowners having successfully replaced the fuel lost following OBS' exit.
Nevertheless, shipowners are still replenishing their bunker fuel stocks in Hong Kong as the port's prices remain below that of Singapore, but this may not continue for long.
"Hong Kong is attractive to shipowners because [Marine Fuel 0.5%S bunker] prices are more competitive especially in the second-half of April where it was often cheaper than Singapore,” a second Singapore-based bunker trader said.
"I don’t think this shift in demand will continue in the near-term. We are still seeing this shift in demand to Hong Kong this week, but it has come off compared with last week [as shipowners are sufficiently stocked],” the trader added.