Sammy Six of global energy and commodity price reporting agency Argus Media on Tuesday (3 November) published an analysis of the market factors driving the strength in high-sulphur fuel oil (HSFO) which has caused the ‘scrubber spread’ to narrow:
The discount of high-sulphur fuel oil (HSFO) to very low-sulphur fuel oil (VLSFO) bunkers in Singapore has moved to the narrowest level on record over the past week because of tight HSFO cargo supplies and weak demand for VLSFO.
The VLSFO-HSFO spread, also known as the “scrubber spread”, fell to a record low of $44.21/t on 29 October. The spread reached a record high of $370.50/t on 2 January as the market adjusted to the International Maritime Organization (IMO) sulphur cap and VLSFO supply tightened, but fell sharply as the Covid-19 pandemic emerged. The spread has averaged $65.21/t over the past six months.
“Availability of HSFO remains scarce and this lack of liquidity seems to be driving the narrowing of the spread, as storage and barging costs rise for HSFO”, one broker said.
HSFO cargo supplies have been tightening as refineries cut runs to accommodate weak demand for jet fuel, which has also curtailed production of residual fuels. There is also strong demand for HSFO in Pakistan, Bangladesh and Saudi Arabia, where it is used in power generation.
More HSFO cargoes have also been exported from Singapore to China to meet an increase in Chinese demand as more retrofitted vessels come on the market.
Logistics and supply of HSFO in Singapore is concentrated among just a few market participants, which is also supporting premiums.
The strength in HSFO markets comes as supplies of VLSFO have also been tight, even as demand for the lower-sulphur fuel remains weak. Container lines are the main bright spot, but they are also the ones that have been most active in installing scrubbers.
The narrow high-low sulphur spread is bad news for shipowners that have installed scrubbers as part of their IMO 2020 strategy. “With the scrubber spread now below $50/t, the payback period of our investments has increased to four-five years”, one buyer said.
Photo credit and source: Argus Media
Published: 4 November, 2020
Program introduces periodic assessments, mass flow metering data analysis, and regular training for relevant key personnel to better handle the MFMS to ensure a high level of continuous operational competency.
U.S. Claims Register Summary recorded a total USD 833 million claim from a total 180 creditors against O.W. Bunker USA, according to the creditor list seen by Singapore bunkering publication Manifold Times.
Glencore purchased fuel through Straits Pinnacle which contracted supply from Unicious Energy. Contaminated HSFO was loaded at Khor Fakkan port and shipped to a FSU in Tanjong Pelepas, Malaysia to be further blended.
Individuals were employees of surveying companies engaged by Shell to inspect the volume of oil loaded onto the vessels which Shell supplied oil to; they allegedly accepted bribes totalling at least USD 213,000.
MPA preliminary investigations revealed that the affected marine fuel was supplied by Glencore Singapore Pte Ltd who later sold part of the same cargo to PetroChina International (Singapore) Pte Ltd.
‘MPA had immediately contacted the relevant bunker suppliers to take necessary steps to ensure that the relevant batch of fuel was no longer supplied. Further investigations are currently on-going,’ it informs.