Argus Media: Fujairah scrubber spread hits record $500/t

Tight supply has driven very low sulphur fuel oil (VLSFO) prices to a record premium against high-sulphur product (HSFO) in Fujairah, UAE, the world’s third largest bunkering port.

17 June, 2022

The price differential between the grades — known as the scrubber or Hi-5 spread — hit $500/t on 16 June, according to Argus assessments, the widest on record. This partly reflects a rise in HSFO imports from Russia, but it is mainly a result of tight VLSFO supply from German firm Uniper, a major supplier in the local bunker market.

Uniper operates a 67,000 b/d refinery in Fujairah and produces up to 5mn t/yr of VLSFO. The firm said the refinery resumed full operations earlier this week, after a slight delay in the delivery of a blendstock cargo. It had been offline for around 10 days.

“We do not expect major disruptions for Fujairah going forward,” Uniper’s managing director Lars Liebig told Argus. “Price levels are driven by Singapore and I am not sure when the situation there will ease off.”

Bunker traders are expecting the supply constraints in Fujairah to ease. “We heard the supply will be back to normal by the end of June,” a trader said. “Until the backlog clears, supplies will be tight until early July or maybe mid-June.”

Fujairah VLSFO prices for cargoes delivered before the end of June rose $60-80/t higher than deals fixed for early July delivery. “The price of a similar-size VLSFO clip can differ by $20/t from one day to the next,” a bunker buyer said.

The supply crunch has also caused a wide swing in the spread between VLSFO prices in Fujairah and Singapore. The Fujairah price dropped $107.50/t below Singapore values on 30 May, the steepest discount since the IMO marine fuel sulphur cap was introduced in January 2020, but it has since swung to a premium, trading $83/t above Singapore prices on 16 June.

By Elshan Aliyev

Photo credit: Argus Media
Published: 20 June, 2022