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Integr8 Fuels: Why are VLSFO prices so high, especially in Singapore?

Inter-relationships of VLSFO with high priced transport fuels is driving prices of the material up, especially in Singapore, according to the report.

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By Steve Christy, Research Contributor, Integr8 Fuels
[email protected]
30 June 2022

Tightness in products still trumps talks of recession

Last month we wrote about the fears of recession versus the tightness in product markets and that tightness in products was definitely ‘winning’. Another month on and it’s oil products that are again driving VLSFO prices even higher! Recession is often mentioned, with obvious higher energy and food costs, central banks hiking interest rates and economic forecasts being downgraded, but the lack of supply and low levels of stocks for key oil products has the overwhelming focus for most oil industry players at the moment.

Integr8 Fuels: Why are VLSFO prices so high, especially in Singapore?

Refinery margins back up to historic highs – it’s a clear signal

In our report a month ago we highlighted the extreme highs in refinery margins, with an indicative global measure up from a ‘norm’ of around $5/bbl to $30/bbl in April/May. These margins had started to ease at the end of last month, but since then they have rebounded, and are back close to $30/bbl. The indicator has been one to watch, and once again reflects the current severe tightness in oil products.

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For us in bunkers, it is worth noting which products are driving prices and margins so high, especially as VLSFO is typically a blended product and/or a decision within the refinery process. Understanding this will give us a signal for what products to watch as an early indicator for VLSFO prices potentially rising further, or to start falling.

Focused on which products are driving VLSFO higher

The graph below illustrates the crack spreads between FOB product prices in Singapore and the price of Dubai crude, and how this has changed from late February to late June this year. Firstly, the current spreads on gasoil/diesel, jet-kero and gasoline are huge at around $500/mt. The gain in the gasoil/diesel crack has been the greatest, going from $125/mt in late February to close to $500/mt more recently (almost a four-fold increase). Gains in the jet-kero crack have been similar, and where as the increase for gasoline has been less, the spread is still $500/mt and around double the level of 4 months ago.

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It is tightness in these ‘transport’ fuels that is driving the crack spreads and refinery margins to record highs. Interestingly, the Singapore naphtha crack has reversed and is now negative versus a $200/mt positive contribution 4 months ago, although this has been influenced by a strike in South Korea which forced the shutdown of naphtha crackers; the strike has ended and operations are reportedly returning to normal.

For us, looking at VLSFO pricing, it is the nature of the product and the inter-relationships with high priced transport fuels that is driving VLSFO prices so high, especially in Singapore. The position in the east is stronger than in the west, with exceptionally low diesel and gasoline exports out of India and China resulting in highly restricted supplies east of Suez. However, this is not to under-estimate the tightness in Rotterdam, where prices and margins are still very high!

In complete contrast, HSFO prices are down

Developments in the market for HSFO are a complete contrast to the high-priced influences on VLSFO. HSFO crack spreads are typically negative as it is now essentially a by-product in the refining system. Since February there has been a slight further negative move in the crack spread, down to around minus $200/mt. In Asia, reports of Russian material moving this far and recent refinery problems in Malaysia have both meant surplus HSFO being sold into the market, and this has helped weaken prices.

Overall, in recent weeks HSFO prices have eased in Singapore and Rotterdam, with both markets now more-or-less in line, and at just below $600/mt.

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Strength in VLSFO & a further drop in HSFO means a wide differential

The more extreme price movements in Singapore have led to a much wider VLSFO/HSFO price differential. Just two months ago this spread was at $100/mt; now it is $500/mt. Although Rotterdam VLSFO prices have not hit the same highs as in Singapore, the VLSFO/HSFO spread is still at $300/mt.

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These are differentials that owners of ships with scrubbers didn’t even dream about two months ago; now the spreads are at or above expectations made when initial scrubber investments were made. This will be extremely important for owners of VLCCs with scrubbers, where current market conditions are dire. A non-scrubber VLCC is currently earning around minus $5,000/day on the spot market, where as a scrubber-fitted one is earning close to $20,000/day; not very high, but at least covering more than fixed operating costs.

It is still the talk of continuing tight markets that dominates pricing

The talk of recession will again continue, but for now tightness in products is more than compensating for economic fears. The IEA reported a drop in global refining capacity last year, something that hasn’t happened since the early 1990s, and there are no quick fixes to constraints in the refining industry. Significantly, net gains in capacity this year and next year are only expected to reach a combined 2.6 million b/d. Also, although we have not mentioned crude oil markets (nor the war in Ukraine) in this report, the ExxonMobil CEO recently spoke out about 3-5 years of “fairly tight markets” because of lack of investment since the covid impact.

We have seen that things can change very quickly and at the extreme it’s the doomsday scenario of an economic and stock market collapse that perhaps some people fear.

However, in terms of what is happening now, economic threats are leading to downwards revisions to future oil demand, but demand is still forecast to increase, just not by as much as before. Therefore, it seems we are looking at sustained pressures on a currently constrained system. So, for now, the key pointers to watch for price direction are still refining margins (they tell us a lot about the market), with also a keen focus on any increase in product exports from China and India (they are negligible at the moment).’

 

Photo credit and source: Integr8 Fuels
Published: 5 July, 2022

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Bunker Fuel

Singapore: Bunker fuel sales soar by 7.5% on year in June 2025

4.59 million mt of various marine fuel grades were delivered at the world’s largest bunkering port in June, up from 4.27 million mt recorded during the similar month in 2024, according to MPA.

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Singapore: Bunker fuel sales soar by 7.5% on year in June 2025

Sales of marine fuel at Singapore port increased by 7.5% on year in June 2025, according to Maritime and Port Authority of Singapore (MPA) data.

In total, 4.59 million metric tonnes (mt) (exact 4,594,700 mt) of various marine fuel grades were delivered at the world’s largest bunkering port in June, up from 4.27 million mt (4,274,900 mt) recorded during the similar month in 2024.

Deliveries of marine fuel oil, low sulphur fuel oil, ultra low sulphur fuel oil, marine gas oil and marine diesel oil in June (against on year) recorded respectively 1.70 million mt (+8.6% from 1.56 million mt), 2.31 million mt (-7.2% from 2.33 million mt), 1,900 mt (from zero), 4,500 mt (-88% from 8,000 mt) and zero (from zero).

Singapore: Bunker fuel sales soar by 7.5% on year in June 2025

Bio-blended variants of marine fuel oil, low sulphur fuel oil, ultra low sulphur fuel oil, marine gas oil and marine diesel oil in June (against on year) recorded respectively 38,800 mt (+671.7% from 2,500 mt), 114,300 mt (+97.9% from 45,400 mt), zero (from zero), zero (from zero) and zero (from zero). B100 biofuel bunkers, introduced in February this year, recorded 1,000 mt of deliveries in June.

LNG and methanol sales were respectively 55,400 mt (-7.8% from 51,700) and zero (from zero mt). There were no recorded sales of ammonia for the month and so far in 2025.

Related: Singapore: Bunker sales volume raises to year record high of 4.88 million mt in May
Related: Singapore: Bunker fuel sales increase by 4% on year in April 2025
Related: Singapore: Bunker fuel sales increase by 0.5% on year in March 2025
Related: Singapore: Bunker fuel sales down by 8.1% on year in February 2025
Related: Singapore: Bunker fuel sales down by 9.1% on year in January 2025

A complete series of articles on Singapore bunker volumes reported by Manifold Times tracked since 2018 can be found via the link here.

 

Photo credit: Maritime and Port Authority of Singapore
Published: 15 July 2025

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Alternative Fuels

ITOCHU orders world’s first ammonia bunkering vessel for Singapore demonstration project

Company contracted Sasaki Shipbuilding to build the 5,000 m3 vessel and Izumi Steel Works to construct an ammonia tank plant that will be loaded onto the vessel, which is expected to be delivered in 2027.

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ITOCHU orders world’s first ammonia bunkering vessel for Singapore demonstration project

ITOCHU Corporation (ITOCHU) on Monday (14 July) announced that it recently signed a shipbuilding contract for the construction of a 5,000 m3 ammonia bunkering vessel with Sasaki Shipbuilding. 

The company also announced an agreement regarding the construction of an ammonia tank plant that will be loaded onto the vessel with Izumi Steel Works. 

These agreements were signed by Clean Ammonia Bunkering Shipping Pte Ltd (CABS), a wholly owned Singapore-based specific purpose company of ITOCHU. 

In relation to this, CABS has concluded a financing agreement with The Hiroshima Bank for financing a part of purchase price of the vessel.

The agreements were concluded to pursue the Demonstration Project for Bunkering Ammonia as Marine Fuel in Singapore adopted by the Ministry of Economy, Trade and Industry in Japan as part of the Global South Future-oriented Co-Creation Project (large-scale demonstration in ASEAN member states). 

Going forward, with an eye toward the demonstration of ammonia bunkering in Singapore after building the world’s first newbuilding ammonia bunkering vessel, ITOCHU said efforts will be made to facilitate concrete discussions with the maritime stakeholders, including the port authority in Singapore, the Maritime & Port Authority of Singapore (MPA), and the fuel producers, while obtaining support from the Japanese Government.

The vessel is to be flagged under the Singapore Registry and is expected to be delivered in September 2027.

ITOCHU will establish a safe offshore bunkering operation of ammonia as marine fuel by way of ship-to-ship transfer through the development and construction of the vessel and demonstration. 

Then, by utilising the vessel, ITOCHU will establish connection between the first movers in clean ammonia production and the first movers in the ammonia-fueled vessels and secure initial demand for ammonia as marine fuel, aiming at the commercialisation of ammonia bunkering business in Singapore and expansion of similar business model to major maritime transportation points around the world, including Spain (Strait of Gibraltar), Egypt (Suez Canal) and Japan.

 

Photo credit: ITOCHU Corporation
Published: 15 July 2025

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S@S Week 2025: Singapore conducts chemical spill exercise to gear up for methanol bunkering

Exercise simulated a methanol spill from a collision involving a methanol-carrying tanker off Singapore’s southern coast, triggering a multi-agency response which included spill containment.

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The Maritime and Port Authority of Singapore (MPA) on Tuesday (15 July) conducted a multi-agency chemical spill exercise to strengthen Singapore’s operational readiness, as part of the International Safety@Sea (S@S) Week. 

MPA is organising the 12th edition of the S@S Week, with this year’s event being the international edition, taking place from 15 to 18 July 2025. 

Conducted off Singapore’s southern coast, the exercise involved 11 vessels and over 150 personnel from more than 10 government agencies and industry partners. Mr Murali, Mr Dominguez and Secretary-General, International Organization for Marine Aids to Navigation, Mr Francis Zachariae, observed the exercise.

The exercise simulated a methanol spill from a collision involving a methanol-carrying tanker, triggering a multi-agency response. This included coordinated efforts for spill containment and the evacuation of injured crew. A range of drone-enabled technologies was trialled during the exercise, including 3D imaging to assess vessel damage and a water curtain misting system to limit the spread of chemical plumes. An Uncrewed Surface Vehicle was also deployed to monitor air quality, reducing the need for responders to enter hazardous zones to perform such monitoring. The Maritime Digital Twin and chemical plume modelling tools were used to enhance situational awareness and support decision-making throughout the exercise.

The exercise is part of MPA’s broader preparations for methanol bunkering and provided a valuable opportunity for agencies and industry partners to better understand the safety and operational challenges, and potential solutions, in handling alternative fuels. Following an open call in March 2025, MPA has received 13 applications for methanol bunker supplier licenses, reflecting strong industry interest in supplying methanol on a commercial scale in Singapore. MPA is evaluating the applications and targets to issue the licenses in Q4 2025, which will cover the period from 1 January 2026 to 31 December 2030. 

Themed ‘The Future of Maritime Safety: Navigating the Next Frontier’, the annual event brings together local and international maritime experts, and the maritime community to promote awareness and facilitate discussions on maritime safety. 

Speaking at the opening today, Mr Murali Pillai, Senior Minister of State, Ministry of Law and Ministry of Transport, said that the maritime sector is facing increasingly complex global challenges, including heightened geopolitical tensions, climate change, and rapid transformation in digitalisation and decarbonisation. He highlighted that we can tackle these challenges by (i) equipping our workforce for future challenges, (ii) harnessing collective expertise through close collaborations and partnerships, and (iii) drawing upon technology and innovation to augment our capabilities. 

In his keynote address, Mr Arsenio Dominguez, Secretary-General of the International Maritime Organization (IMO), underscored the need for robust safety frameworks and regulations as the maritime landscape evolves. He cited Maritime Autonomous Surface Ships and new ship designs and systems using sustainable marine fuels as examples of how the maritime sector is transforming and outlined IMO’s priorities in those areas. Mr Dominguez also highlighted the importance of government-industry collaboration and initiatives like the Safety@Sea Singapore Campaign to foster a safety-first culture at sea.  

This year’s conference features 19 speakers across three plenaries. Discussions will focus on issues shaping the future of maritime safety, including lessons learned from past incidents, and the human element in ensuring safety as the industry transforms. A new Safety@Sea Community Conversations event will also bring together representatives from shipping companies, regional ferry operators, harbour craft operators and terminal operators to share their experiences and efforts in fostering a safety culture in their organisations. 

Over 1,800 participants from more than 40 countries are expected to participate in the week’s sessions. Other highlights include the Responders Plus Programme (RPP) Maritime Workshop jointly organised by MPA and the Singapore Civil Defence Force, and two safety forums organised by the MPA-Harbour Craft and MPA-Pleasure Craft Safety Work Groups to promote safety awareness and best practices within the local maritime community. 

MPA is also enhancing safety across other areas of port operations. In collaboration with Skyports Drone Services, TFG Marine and CBS Ventures, MPA and the partners will complete Singapore’s first shore-to-ship drone trials for delivery and retrieval operations from bunker tankers later this week. 

The use of drones reduces reliance on harbour craft for such operations, improving efficiency while reducing pollution and congestion. 

It also minimises safety risks by removing the need for crew to handle and transfer heavy items between the ship and shore using harbour craft. Safety considerations, including the management of electrostatic discharge risks during the drone operations, are carefully reviewed in preparation for the trials. 

Findings from these trials will inform the development of safety protocols and an operational framework to support the phased implementation of this new maritime service.

 

Photo credit: Manifold Times
Published: 15 July 2025

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