Sammy Six of global energy and commodity price reporting agency Argus Media on Wednesday (20 October) issued a report on bunker prices at the Singapore market.
The premium of low-sulphur marine gasoil (LSMGO) bunkers in Singapore has risen to record levels over very-low sulphur fuel oil (VLSFO) grade bunkers, reaching an average of USD 100/t so far in October.
Gasoil prices have spiked in recent weeks in line with LNG spot prices because of a shortage of gas in Asia and Europe, as refiners are maximising the production of middle distillates that can also be used for heating purposes.
Gasoil crack spreads as a result are outpacing that of other refined products, especially relative to residue products. Front-month gasoil crack spreads in Singapore averaged USD14.70/bl in October, up significantly from USD10.40/bl in September, according to Argus data. This compares with VLSFO margins of USD10.90/bl in October, down from USD11.20/bl in September.
This weakening residual crack spread is resulting in reduced output of residual fuel, which is tightening supplies of VLSFO for bunkers in Singapore. Prompt deliveries of VLSFO are commanding up to USD10/t more than stems that are to be delivered on a later date, according to deal information gathered by Argus.
The tightness is also aggravated by a Covid-19 outbreak at the Universal Terminal at Singapore’s Jurong island.
While higher gasoil prices have been a boost for some suppliers, the effect has been temporary. “Our margins have only improved for a short while, as the distillate ex-wharf price for November delivery has also risen and the spike in premiums led to an increase in competition”, said a Singapore gasoil bunker trader.
The sharp rise in premiums of gasoil over VLSFO-grade bunkers is another example of the interconnectedness of energy markets across products and geographies, along with the cascading effects of a gas supply crunch ahead of winter in the northern hemisphere.
Photo credit and source: Argus Media
Published: 21 October, 2021
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