Singapore's VLSFO-HSFO spread widens to 5-month high on firm fundamentals
13th July 2021 06:38 GMT

The improving demand for marine fuel 0.5%S bunker in July, compared with June, continues to drive the widening spread between FOB Singapore marine fuel 0.5%S and 380 CST high sulfur fuel oil cargo assessments, Singapore-based bunker suppliers.

The spread widened to a 5-month high on July 12 at $130.32/mt, Platts data showed. It was last assessed higher on Feb. 25 at $132/mt, although bunker suppliers were cautious of reading into signs of an uptrend.

"[Singapore marine fuel 0.5%S bunker] demand is marginally better [so far in July] than May and June, but overall, I don't think the picture has changed," a source from one of the largest delivered bunkers suppliers in Singapore said.

A second supplier said: "A more accurate picture is what the delivered [Singapore marine fuel 0.5%] premiums to cargo show, and they're still weak; that coupled with the fact that some of the majors are returning barges, which are coming to the end of the time-charter period present a truer picture that we're a long way off from a recovery."

"The ex-wharf market though is improving, and term discussions for August are already being offered a couple of dollars higher than July at close to $6/mt," the supplier added.

The spread between delivered Singapore marine fuel 0.5%S and the FOB Singapore market was assessed at $3.87/mt, well below the typical double-digit spread that bunker suppliers target to cover operating costs.

The narrower spread between delivered Zhoushan and Singapore prices, with Singapore marine fuel 0.5%S prices assessed below Zhoushan since July 6, was last $3/mt below Zhoushan on July 12.

Over the second-quarter, lower prices in Zhoushan pulled demand away from Singapore as shipowners increased bunkering activity there, Platts reported previously.

Another factor in the rising spread on the supply side is the quantity of arbitrage low sulfur fuel oil volumes expected to arrive in Singapore in July, estimated at approximately 2.2 million mt, similar to June-arrival volumes.

"The fact that the end-July/early-August period is quite tight is definitely a factor, as two [0.5%S] cargoes from Malaysia that were offered in the market were quickly snapped up, and people are still looking for more cargo," a fuel oil trader said.

Bunkerworld ,
13th July 2021 06:38 GMT