Jan-arrival LSFO arbitrage cargo in Singapore expected to rise from Dec: traders
23rd December 2021 09:29 GMT

January arrivals of low sulfur fuel oil arbitrage cargoes into Singapore are estimated to reach 2.4 million-2.5 million mt, higher from about 1.8 million mt in December, traders based in the city-state said.

At least one trader, though, had the volumes pegged at 2 million mt, after accounting for some slippage in February, especially for end-January arrival volumes, "since a delay of even a day or so makes a difference to the count," he said.

Underpinning at least some of the increase was the expectation of at least cargo of low sulfur Skikda crude barrels loading in December from Algeria heading East, after no November-loading cargoes were shipped to Singapore, traders said.

The Skikda barrels, typically 0.1-0.2% sulfur, find use as a sulfur cutter in fuel oil blending, in order to produce on-specification marine fuel 0.5%.

Overall, volumes from Latin America, mostly Brazil, stand pegged at roughly 700,000 mt in January, with at least 100,000 mt accounted by high sulfur fuel oil shipments.

"This volume is slightly less than what we normally bring in, but going forward as well, the volumes we would also ship from the RLAM refinery will not be passing through us, now that the refinery's sale has been effected," said a company source at Petrobras.

Petrobras' Landulpho Alves refinery, or RLAM, in São Francisco do Conde, Bahia, was sold to Abu Dhabi's Mubadala Capital in November 2021, according to a company statement.

As a result, Petrobras, one of the largest fuel oil suppliers in Singapore, is expected to see a drop of about 200,000 mt in fuel oil shipments each month in 2022 compared to 2021, if the company is not incharge of lifting RLAM's fuel oil production, according to the company source.

Despite the increased supply in January compared to December, the cash premiums and the front-month backwardation remained strong, amid anticipation of an "at least 1 million mt stock draw in December, which will deplete storage levels significantly," according to a Singapore-based fuel oil trader.

Latest Enterprise Singapore data showed that the city-state's residue stock levels stood at 20.93 million barrels, or 3.3 million mt, as of Dec. 15, slightly higher than the three-month low stocks levels hit Dec. 1 at 19.82 million barrels.


Downstream demand slips


On the downstream side, since December, VLSFO bunker demand in Singapore has slipped amid a more subdued shipping activity and loss of inquiries to other ports, market sources said.

“It has been an increasingly tough market for independent bunker suppliers to compete against the oil majors, especially as delivered low sulfur fuel oil bunker premiums has lagged the rising cost of the ex-wharf grade,” a Singapore-based bunker supplier said.

The strengthening of Singapore-delivered marine fuel 0.5%S premiums has led to a loss of bunker demand to neighbors such as, Port Klang, North Asian ports, and European ports such as Malta, according to market sources.

“While the market still sees a relatively consistent inflow of low sulfur fuel oil bunker inquiries on a daily basis, inquiries from container liners and bulk carrier segments were lost to major container terminals in China and also South Korea too,” a second bunker supplier said.

The second bunker supplier also said that the limited low sulfur fuel oil stockpiles in Singapore has tightened loading schedules, affecting ex-wharf buyers.

Platts ,
23rd December 2021 09:29 GMT