Business

Argus Media: LSFO bunker spreads at record lows

Lower demand and improved supply logistics for LSFO main factors behind the narrowing of price premium over HSFO.

Published

4 years ago

February 28, 2020

Erik Hoffman and Enes Tunagur of global energy and commodity price reporting agency Argus Media on Wednesday (26 February) issued a report analysing the diminishing LSFO fuel spread over 3.5% sulphur marine fuel:

Lower demand and improved supply logistics for low-sulphur marine fuel have pushed its price premium to high-sulphur marine fuel to all-time lows at the world's three largest bunkering hubs.

The premium of 0.5% sulphur marine fuel oil (0.5% fuel oil) over 3.5% sulphur 380cst marine fuel oil (3.5% fuel oil) has narrowed most sharply in Fujairah. Since 30 December last year — when it was at its highest — the premium has come down by 72%, from $497.50/t to $140.50/t yesterday.

In Rotterdam it dropped by 60% from a high of $309.50/t on 30 December to $125/t yesterday. The equivalent barge fob price premium for 0.5% sulphur fuel oil fell even more steeply in Rotterdam over the period, dropping by 64% from $323.25/t on 3 January to $116.50/t yesterday. Rising European fuel oil supply and inflows from Scandinavia weighed on 0.5% fuel oil fob barge prices. Fuel oil output in the EU-16, including high and low-sulphur fuels, was at its highest in January since April 2019 at 1.08mn b/d, Euroilstock data showed. Fresh 0.5% fuel oil production boosted output.

In Singapore the premium has narrowed by 58% since its widest on 2 January, from $370.50/t to $155.25/t yesterday.

Underlying front-month Ice Brent and Ice gasoil values have contributed to bring the low-sulphur premiums down. But their impact on the premiums has not been as sharp as the drop in 0.5% fuel oil prices.

Front-month Ice Brent and Ice gasoil prices came down by 20% and 24%, respectively, between 30 December and yesterday. This compares with 0.5% fuel oil prices, which have fallen by 43% in Fujairah and 31% in Rotterdam since 30 December, and 38% in Singapore since 2 January.

Global 0.5% fuel oil demand peaked in December amid limited supply logistics as shipowners were scrambling to secure compliant fuel before the IMO's 0.5% sulphur cap was implemented on 1 January.

Delivery times for 0.5% fuel oil have improved significantly since the weeks leading up to the sulphur cap. In late November, shipowners had to book eight days in advance to get 0.5% fuel oil when demand for IMO-compliant fuel started picking up. A barge shortage in Fujairah around the same time caused loading delays of 2-4 days at terminals. Barge queues also limited 0.5% fuel oil supply in Rotterdam and led suppliers to charge premiums of around $20/t for prompt deliveries.

The price for 3.5% fuel oil did not collapse around 1 January, as some predicted, but has held up better than 0.5% fuel oil and 0.1% sulphur marine gasoil (MGO) prices in 2020. Since 30 December the 3.5% fuel oil price has fallen by 15% from $340/t to $290/t in Singapore, held at $279.50/t in Rotterdam, and risen by 10% from $268.50/t to $295/t in Fujairah.

The US has replaced Singapore as the largest cargo buyer of 3.5% fuel oil from Russia — the world's largest producer — in 2020, as bunkering demand for the non-compliant product dropped along with delayed scrubber installations. Fresh demand from US refineries resulted in a rebound of 3.5% fuel oil barge fob prices, driving values in northwest Europe from a low of $179/t on 29 November to $265/t yesterday.

More scrubber-fitted vessels are expected to return to operation in March and April to boost demand for 3.5% fuel oil, which could add upward price pressure and narrow the spread.

Some suppliers are reassessing demand for 3.5% fuel oil and possibly allocating more storage and barge tank space to it, which would add downward price pressure.

Photo credit and source: Argus Media
Published: 28 February, 2020

Vessel Arrest

Malaysia: MMEA detains tanker for illegal anchoring in East Johor waters

Panama-registered vessel was operated by 17 crew members, aged between 21 to 58 years, from Pakistan, India and Bangladesh.

Published

6 hours ago

November 29, 2023

Admin

Malaysia: MMEA detains tanker for illegal anchoring in East Johor waters

The Malaysian Maritime Enforcement Agency (MMEA) on Tuesday (28 November) said a Panama-registered tanker has been detained for illegally anchoring in East Johor waters on 27 November.

MMEA Tanjung Sedili Zone acting director Maritime Cmdr Mohd Najib Sam said the tanker was detained by a patrol boat at 11am at 15.8 nautical miles northeast of Tanjung Penawar.

The captain of the vessel failed to produce any documents that permission had been obtained to anchor in Malaysian waters.

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The vessel was operated by 17 crew members, aged between 21 to 58 years, from Pakistan, India and Bangladesh.

The case will be investigated under Section 491B(1)(L) of the Merchant Shipping Ordinance 1952 for anchoring without permission. If found guilty, individuals may be fined not exceeding MYR 100,000 or face an imprisonment term of not more than two years, or both.

Manifold Times previously reported law firm Oon & Bazul LLP sharing on steps shipowners should keep in mind before anchoring and conducting STS operations in Malaysian waters to avoid detention.

Photo credit: Malaysian Maritime Enforcement Agency
Published: 29 November, 2023

Alternative Fuels

DNV paper outlines bunkering of alternative marine fuels for boxships

Third edition of its paper series focuses on LNG, methanol and ammonia as alternative bunker fuel options for containerships; explores bunkering aspects for LNG and methanol.

Published

6 hours ago

November 29, 2023

Admin

DNV paper outlines bunkering of alternative marine fuels for boxships

Classification society DNV recently released the third edition of its paper series Alternative fuels for containerships, focused on LNG, methanol and ammonia as alternative bunker fuel options for containerships.

In its updated paper series, DNV examined the different alternative marine fuel options and provided an overview of the most important technical and commercial considerations for the containership sector.

It explored the bunkering technology for LNG, bunkering infrastructure for methanol, and availability and infrastructure of ammonia.

Building on the foundation laid in the second edition, which focused on the most important aspects of methanol as a fuel, this latest third edition delves deeper – exploring the technical intricacies and commercial considerations associated with adopting methanol as an alternative fuel for containerships.

Furthermore, it provides an overview of crucial aspects related to ammonia and discusses its potential as an alternative fuel for containerships.

Amongst others, the new edition of the paper looks at the following aspects:

Technical design considerations for methanol
Commercial implications of adopting methanol as an alternative fuel
Ammonia's potential as an alternative fuel
Availability, infrastructure and ship fuel technology for ammonia
Major updates based on the latest IMO GHG strategy decisions at the MEPC 80 meeting

Note: The third edition of DNV’s full paper titled Alternative Fuels for Containerships can be found here.

Photo credit: DNV
Published: 29 November, 2023

Alternative Fuels

EDF, LR and Arup launch tool scoring ports’ potential to produce and bunker electrofuels

Tool is also applied to three different port scenarios, including ports exploring fuel production and bunkering, ports exploring fuel exports, and ports exploring fuel imports and bunkering.

Published

6 hours ago

November 29, 2023

Admin

EDF, LR and Arup launch tool scoring ports’ potential to produce and bunker electrofuels

Lloyd’s Register (LR) Maritime Decarbonisation Hub and Environmental Defense Fund (EDF), in collaboration with Arup, on Tuesday (28 November) introduced the Sustainable First Movers Initiative Identification Tool, a system to help shipping stakeholders align investment decisions that support the maritime energy transition away from fossil fuels.

The tool, which is presented in a preliminary findings report – The Potential of Ports in Developing Sustainable First Movers Initiatives – scores a port’s potential to produce and bunker electrofuels while delivering local environmental and community benefits in alignment with the global temperature target of 1.5 degrees Celsius set by the Paris Agreement.

“Ports can play an important role in kickstarting shipping’s decarbonisation process even before global policies are established,” said Marie Cabbia Hubatova, Director, Global Shipping at Environmental Defense Fund.

“By considering the impact sustainable first mover initiatives can have on port-side communities, climate, environment and economies, resources can be better directed to locations where these initiatives will make the biggest difference.”

With close to two billion people living near coastal zones globally, the role of, and impacts on local port communities must be intentionally considered as the sector decarbonises globally. Ports can play a crucial role in ensuring shipping decarbonisation efforts are done in a way that has positive impacts on port communities.

The preliminary phase of the Sustainable First Movers Initiative Identification Tool analyses 108 ports in the Indo-Pacific region according to five criteria including land suitability, air quality, renewable energy surplus, economic resilience and ship traffic.

It is also applied to three different port scenarios, including ports exploring fuel production and bunkering, ports exploring fuel exports, and ports exploring fuel imports and bunkering. The combined criteria and scenario evaluation determines which ports have the greatest potential (high potential) for sustainable first mover initiatives to lead to significant emissions reductions and positive impacts in nearby communities, such as improved air quality and economic resilience.

“The transition to clean energy supply for shipping can be achieved only if stakeholders act together. Identifying potential port locations is the first step in this process,” said Dr Carlo Raucci, Consultant at Lloyd’s Register Maritime Decarbonisation Hub. “This approach sets the base for a regional sustainable transition that considers the impacts on port-side communities and the need to avoid regions in the Global South lagging behind.”

Regions in the Global South are fundamental in driving the decarbonisation of shipping. To make this transition effective, the rate at which different countries adopt and scale up electrofuels must be proportional to the difference in capital resources globally to avoid additional costs being passed on to local communities. Sustainable first mover initiatives can play an important role in making this happen by ensuring the sector’s decarbonisation is inclusive of all regions and by engaging all shipping stakeholders, including port-side communities.

“There’s a huge opportunity for early adopter shipping decarbonisation initiatives to unlock benefits for people and planet – shaping the way for a more equitable transition in the 2030s,” said Mark Button, Associate, Arup. “Our collective approach shows that taking a holistic view of shipping traffic, fuel production potential and port communities could help prioritise action at ports with the greatest near-term potential.”

The tool can be customised according to stakeholders’ needs and goals and is dependent on scenario desirability. The next phase of this work will include the selection and detailed assessment of 10 ports to help better understand local needs and maximise the value offered by sustainable first mover initiatives.

LR and EDF carried out a joint study on ammonia as shipping fuel, and LR and Arup have collaborated on The Resilience Shift study focused on fuel demand for early adopters in green corridors, ports, and energy systems, amongst many other projects.

Photo credit: Lloyd’s Register
Published: 29 November, 2023