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Argus Media: Refloating of Suez ship dents Asian LSFO backwardation

30 Mar 2021

Sarah Giam of global energy and commodity price reporting agency Argus Media on Monday (25 March) published a summary of how the recent congestion at the Suez Canal increased the east-west bunker fuel spread but this has shown signs of weakening since the vessel was refloated:

The Asian 0.5% sulphur marine fuel backwardation weakened today on signs of a resumption of traffic through the Suez Canal, as the stricken container vessel Ever Given was refloated.

Asian 0.5% sulphur marine fuel prompt prices have weakened against forward months. This likely came against expectations of the Suez Canal reopening soon, although the build-up of vessel traffic could take a while to clear, traders said. April 0.5% sulphur marine fuel swaps were assessed at a $0.25/t premium to May today, down from a $1.25/t premium on 26 March, which was the widest spread since $1.50/t on 15 March.

Asian 0.5% sulphur marine fuel margins also came off to $10.28/bl today, after rising consecutively in the three previous sessions to reach $10.86/bl on 26 March.

The east-west spread, or the difference between 0.5% sulphur marine fuel prices in Asia and Europe, also weakened slightly to around $19.50-21/t at the end of the Singapore afternoon online trading window today at around 8.30am GMT, according to market estimates, although there were no trades on the spread. It had risen sharply to $22/t on 26 March on expectations of potential delays to eastbound supplies, which may not be as serious if traffic resumes at the Suez Canal soon.

Supplies for second-half April and May delivery are likely to be affected but the Asia-Pacific region may be well supplied before that by previous high export volumes from India and Taiwan, market participants said. Before the Ever Given ran aground on 23 March, low-sulphur arbitrage arrivals to Singapore from the west of Suez in April were estimated at around 2.5mn-3mn t (16.1mn-19.4mn bl), similar to March volumes or slightly higher, though the affected fuel oil volumes at present remain fluid.

Photo credit and source:
Argus Media
Published: 30 March, 2021

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