Tightening MF 0.5%S supply in S Korea sees delivered spread from Singapore improve
19th August 2021 08:00 GMT

Lower supply of delivered marine fuel 0.5%S bunker fuel in South Korea starting September has seen the spread of the delivered South Korea grade widen from the Singapore assessment in recent days, according to refining sources and bunker traders.

S&P Global Platts data showed that the spread between the two locations hit a 45-day high of $37/mt Aug. 17, although the spread has since declined to $26/mt Aug. 18.

"The spread is typically in positive territory [above Singapore delivered marine fuel 0.5%S], and right now, we're able to make some margin," said a source at Hyundai Oilbank, one of the three producers of marine fuel 0.5%S in South Korea.

"Another reason for the wider spread may be because going into September, [marine fuel 0.5%S] supply will be a little bit less from our side, because our residue desulfurization unit will be going in for maintenance," the source added.

The company, which accounts for 140,000-150,000 mt/month of production, plans to undergo maintenance for one of its two modules of the 90,000 b/d residue desulfurization, or RDS, unit at its Daesan refinery for about 15 days in September, with the second module to shut for 15 days in October.

As a result of this staggered turnaround, Hyundai Oilbank will continue to meet its term supply obligations, although total marine fuel 0.5%S production will fall to about 100,000 mt/month over these two months.

Furthermore, October is also expected to see lesser marine fuel 0.5%S production from the country's biggest refiner, SK Energy, which is expected to undergo a turnaround of its own RDS unit in October.

A company source at SK Energy could not be reached for comment.

The spread between South Korea and Singapore flipped to negative territory July 28 at minus $6/mt, before firmly returning to positive territory on Aug. 4, continuing to widen till Aug. 17, Platts data showed.

The last time the spread was negative -- which means the South Korea delivered price was lower than Singapore -- was April 20, and moved in positive territory the next day.

Local bunker demand strengthened after the price became competitive late July, industry sources said, with more spot inquiries. "[Spot] demand improved, and has been better lately as more vessels have opted for Korea," said a bunker trader, although incremental spot demand may drop now that the spread is wider, he added.

South Korea's marine fuel 0.5%S bunker price is typically the highest among North Asian bunkering ports, while it dropped to the lowest on July 28, according to Platts data.

This attracted demand from China, Hong Kong and even from Singapore, market sources said.

Platts ,
19th August 2021 08:00 GMT