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
The top three positive movers in the 2020 bunker supplier list are Hong Lam Fuels Pte Ltd (+13); Chevron Singapore Pte Ltd (+12); and SK Energy International (+8), according to MPA list.
‘We will operate in the Singapore bunkering market from the Tokyo, with support from local staff at Sumitomo Corporation Singapore,’ source tells Manifold Times.
Changes include abolishing advance declaration of bunkers as dangerous cargo, reducing pilotage fees on vessels receiving bunkers, and a ‘whitelist’ system for bunker tankers.
Claim relates to deliveries of MGO to the vessels Pacific Diligence, Pacific Valkyrie, Pacific Defiance, Crest Alpha 1, and Pacific Warlock between March 2020 to April 2020.
3,490 mt of LSFO from Itochu Enex was lifted at Universal Terminal; the same bunker stem was bought by Global Marine Logistics and delivered by bunker tanker Juma to receiving vessel Kirana Nawa.
Representatives of Veritas Petroleum Services, Maersk, INTERTANKO, ElbOil Singapore, and SDE International provide insight from their respective fields of expertise on what lies ahead.