HSFO

Integr8: Geopolitics have a huge bearing on our market, but something different is happening in HSFO bunker pricing

Firm discusses the impact of the extreme events unfolding in Middle East, weaker economic indications for China and Europe and causes of huge spread between VLSFO and HSFO, amongst others.

Published

11 months ago

October 31, 2023

Admin

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

26 October 2023

We are in a global, geopolitical market

It is often said that the more dramatic movements in oil prices are usually driven by world events, and that the bunker market is no different to any other part of the crude and products markets.

This is exactly what has happened in October. Crude prices were falling in the first week of the month on the back of weaker economic indications for China and Europe. Even though Saudi Arabia and Russia stated they would maintain their voluntary production cutbacks through to the end of the year, this had little impact on the market and oil prices continued their bearish slide.

Over this first week of October Brent futures were down $7/bbl, Singapore VLSFO down $50/mt and Rotterdam VLSFO down by almost $40/mt.

Shortly thereafter, the extreme events in the Middle East took hold. Oil prices rebounded with the news, wiping out the declines seen in the previous week; Brent futures moved back up to the low $90s, Singapore VLSFO returned to around $680/mt, and Rotterdam VLSFO hit $625/mt.

These “down and up” price developments and the close relationship between Brent crude and VLSFO are shown clearly in the chart below.

Prices have eased at the time of writing, as people wait to see where the Middle East conflict goes and weaker economic indicators out of Europe come to the forefront.

Crude price direction is usually a very good guide for VLSFO

Putting some longer-term context into the Singapore VLSFO versus Brent relationship, the chart below illustrates monthly average price developments for these two commodities so far this year. It shows their very strong correlation and the range in pricing. When Brent crude was around $75/bbl, Singapore VLSFO was close to $575/mt. With recent crude prices rising to their highest levels so far this year and Brent in the low $90s, so monthly average Singapore VLSFO prices are at $660/mt and almost $100/mt above their mid-year lows.

In the near term, a lot of the movement in crude oil prices will be linked to what is happening in the Middle East, and so VLSFO price direction will be derived from these events. However, there are still nuances within the bunker market that we continue to monitor, not least the differences between VLSFO and HSFO.

In complete contrast to VLSFO, average prices for HSFO have fallen!

Unlike VLSFO prices closely tracking crude and moving higher over recent months, there has been a turning point in the HSFO market and prices have actually fallen. Whereas monthly average Singapore VLSFO prices are now $30/mt higher than in August, Singapore HSFO prices are $70/mt lower!

VLSFO and HSFO go in different directions

From the initial analysis, Singapore VLSFO closely tracks crude, so it is no surprise that the price relationship between these two are consistent. In fact, Singapore VLSFO is priced at close to 100% of Brent (on a weight basis) and this year has only varied within a very narrow range of 95-103%. If you go back three years, the relationship has been consistently tight and VLSFO has been within the 95-108% range of Brent in all but three months.

This is in complete contrast to HSFO pricing versus crude. Taking Singapore HSFO as a benchmark, its percentage of Brent shifted from around 65% at the start of the year to close to 80% by mid-year. It is no surprise that the HSFO/Brent relationship strengthened even further in July and August to close to 90%, as Saudi Arabia and Russia made additional, voluntary cuts in crude production/exports totalling 1.5 million b/d (all of which are medium and heavy grades). Consequently, HSFO supply was always going to be squeezed and its relative price likely to rise.

With statements that the Saudi (and Russian) production cuts would run through to the end of this year, it might have been the case that HSFO prices would continue to be supported, at least going into the fourth quarter. This hasn’t happened, and HSFO prices have already fallen sharply despite the Saudi Arabia and Russia strategy and heightened geopolitical risks in the Middle East.

Why has HSFO fallen relative to Brent?

HSFO pricing was always expected to weaken versus Brent, not least in anticipation of the rise in Saudi and Russian crude exports from January. However, the shift has been ‘early’ and the key trigger for the turnaround has centred on the Middle East and a recent substantial increase in HSFO exports.

HSFO is used in a number of power-generating plants in the Middle East and demand is high in the region during the summer months to meet air conditioning demand. As temperatures eased in October, ‘local’ demand for HSFO fell back. Consequently, HSFO exports from the UAE moved from virtually nothing in September, to indications of around 3 million bbls going to Singapore in the middle two weeks of October. On this basis we could expect the seasonal pattern of continued HSFO exports from the UAE until power-generating demand increases again Q2 next year.

In addition to this seasonal shift, there has also been a structural change in HSFO exports from Kuwait. Like the UAE, Kuwait has been burning HSFO in its power generating sector, with supplies coming from their domestic refineries as well as imported volumes. However, with the phased introduction of the massive, 615,000 b/d Al Zour refinery from late last year, it was always planned that the country would switch to using lower sulphur fuel oil as part of its Environmental Fuel Project (EFP). This is now in place and the agreement is for Al Zour to supply up to 225,000 b/d of low-sulphur material to the Kuwait Ministry of Electricity as part of their cleaner energy program.

This has therefore ‘freed-up’ Kuwaiti HSFO for export and also removed them as a buyer of HSFO from the international market on a permanent basis. These ‘additional’ HSFO volumes are moving to Asia and are another contributing factor to a weakening HSFO price.

It all means a widening VLSFO – HSFO price differential

Looking at the VLSFO and HSFO markets, it is clear the price spread between the two products has widened. With ‘incremental’ HSFO volumes available in the Middle East and moving into Singapore, the widening has been greater in these two bunker regions.

This has meant the VLSFO – HSFO spread in Singapore has shifted from an extreme low of only $80/mt in July and August to an average of $180/mt in October. This is still not back to levels seen at the start of this year, but the advantages for scrubber-fitted ships are clearly far better than they have been since March.

The price spread in Fujairah is very close to the Singapore differential, at around $175/mt in October. However, since the Russian invasion of Ukraine and the resulting ban on Russian products entering Europe (halting a substantial flow of HSFO), the VLSFO – HSFO price spread in Europe has typically been far smaller than in the Middle East and Asia. So, although the spread in Europe has widened, in Rotterdam it has only moved out to $80/mt in October, $100/mt less than in Singapore!

What next?

With the shifts in the HSFO pricing and additional heavier crudes expected to enter the market from the start of next year as Saudi Arabia and Russia remove their voluntary production cutbacks, we can expect ongoing relative downwards pressures on HSFO prices. In the near term, it remains to see what the geopolitical risk is on crude prices, which in turn will largely determine VLSFO pricing. Now the VLSFO – HSFO spread is far more attractive for owners of scrubber-fitted ships in the Middle East and Asia.

Photo credit and source: Integr8
Published: 31 October, 2023

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Baltic Exchange: Bunker Report (8 October 2024)

Bunker report panellists include Island Oil Limited, Cockett Marine Oil Pte, Monjasa A/S and KPI OceanConnect.

Published

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October 9, 2024

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Baltic Exchange: Bunker Report (8 October 2024)

The following bunker report has been provided by freight market information provider Baltic Exchange for post on Singapore bunkering publication Manifold Times:

Note:

All values are in US$/metric ton, all-in (invoice price), delivered on board
Delivery in 7-10 days
ISO 8217:2010
IFO 380 3.5% Sulphur
IFO 380 0.5% Sulphur
DMA 0.1% Sulphur

Rotterdam – Waalhaven – Maasvlakte range
Houston – Houston Harbor
Singapore – Anchorage, under SBA Scheme
Fujairah – Offshore Anchorage Area

Submitted weekly at Close of Business UK time, on Tuesday & Thursdays

Panellists:
Island Oil Limited, Cockett Marine Oil Pte, Monjasa A/S, KPI OceanConnect

Photo credit and source: Baltic Exchange
Published: 9 October, 2024

Bunker Fuel Availability

ENGINE: East of Suez Bunker Fuel Availability Outlook (8 Oct 2024)

VLSFO and HSFO supply is tight in Singapore; VLSFO and HSFO availability improves in Zhoushan; availability good across all grades in several Sri Lankan ports.

Published

6 hours ago

October 9, 2024

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The following article regarding regional bunker fuel availability outlook for the East of Suez region has been provided by online marine fuels procurement platform ENGINE for publication on Singapore bunkering publication Manifold Times:

VLSFO and HSFO supply is tight in Singapore
VLSFO and HSFO availability improves in Zhoushan
Availability good across all grades in several Sri Lankan ports

Singapore and Malaysia

VLSFO availability in Singapore remains tight due to “healthy demand,” with some suppliers facing low stock levels and terminal loading delays. Lead times of 10-15 days are recommended for VLSFO, nearly the same as last week.

HSFO supply is also under pressure, with lead times of more than two weeks recommended, although some suppliers can accommodate stems within 11 days, but these are typically priced higher, according to a source.

In contrast, LSMGO is more readily available, with lead times ranging from 2-6 days.

Data from Enterprise Singapore shows that residual fuel oil stocks in Singapore averaged 8% lower in September than in August, dropping below 18 million bbls despite a 28% rise in net fuel oil imports. Fuel oil imports decreased by 202,000 bbls, a smaller decline compared to the 898,000 bbls drop in exports. Middle distillate stocks at the port also fell, averaging 8% lower during the month.

In Malaysia's Port Klang, VLSFO and LSMGO supplies are plentiful, and some suppliers can offer prompt deliveries for smaller quantities. However, HSFO availability continues to be limited.

East Asia

In Zhoushan, improved VLSFO and HSFO availability, combined with low bunker demand, has reduced recommended lead times from 7-10 days last week, to 3-5 days now. LSMGO supply is normal in the port, with unchanged lead times of 3-5 days.

In Hong Kong, a lead time of about seven days is recommended for all fuel grades, which remains nearly the same as last week.

All Taiwanese ports have resumed full operations after disruptions from Typhoon Krathon last week. VLSFO and LSMGO supplies are stable in Hualien, Taichung and Keelung, with prompt lead times of 2-3 days, down from 4-5 days last week. However, congestion in Kaohsiung has stretched lead times to 4-5 days for both grades.

A source stated that tight barge availability has contributed to the tightening of all fuel grades in South Korean ports. In southern ports, VLSFO and LSMGO supplies have become tight, with recommended lead times increasing from 5-9 days last week to around 11 days now. However, some suppliers can still offer grades for prompt delivery dates, according to a trader. HSFO supply is also tight, with recommended lead times extending beyond two weeks.

In western South Korean ports, VLSFO and LSMGO lead times are advised at around 10-14 days, nearly unchanged from last week. Meanwhile, HSFO availability has improved, with lead times dropping from up to 15 days to around nine days now.

High waves are also forecasted to intermittently affect bunker operations at the ports of Ulsan, Onsan, Busan, and Yeosu throughout this week.

In Japan, LSMGO supply remains strong at major ports such as Tokyo, Chiba, Yokohama, Kawasaki, Osaka, Kobe, Sakai, Nagoya, Yokkaichi, Mizushima, and Oita. VLSFO is widely available, though prompt supply is tight in Oita.

HSFO supply is a bit tight for prompt delivery dates in Oita. In the Tokyo Bay area ports of Tokyo, Chiba, Kawasaki, and Yokohama, HSFO supply has tightened due to technical issues at refineries. One refinery has halted HSFO production until 15 October, while two others are facing cargo loading delays, according to a source.

Oceania

A bunker barge serving Fremantle and Kwinana ports is in dry dock until mid-November, making VLSFO unavailable by barge during this period. However, LSMGO can still be supplied at berth. The Western Australian port of Kembla remains unaffected, as bunker deliveries are exclusively by truck and ex-pipe. In New South Wales, Sydney has sufficient LSMGO stocks, but HSFO may require longer lead times.

In Victoria, Melbourne and Geelong have ample supplies of VLSFO and LSMGO, but prompt HSFO deliveries may be challenging. In Queensland, Brisbane and Gladstone ports have sufficient VLSFO and LSMGO with lead times of 7-8 days, although HSFO availability is limited in Brisbane.

In New Zealand, Tauranga and Auckland have good VLSFO supplies, with Auckland also having strong LSMGO availability. However, intermittent rough weather is forecasted in Tauranga over the next few days, which may affect bunker operations.

South Asia

In the Indian ports of Mumbai, Kandla, Tuticorin, Cochin, and Chennai, VLSFO and LSMGO supplies are limited. VLSFO and LSMGO grades are available in Visakhapatnam, but a supplier in Paradip and Haldia is almost out of stock for both grades.

Sri Lanka's ports of Colombo and Hambantota have sufficient supplies of all grades, with prompt lead times of about three days.

Middle East

All grades remain tight in Fujairah, with most suppliers recommending lead times of 7-10 days, consistent with last week. However, some suppliers can still provide grades for prompt deliveries, according to a source. A similar situation exists in Khor Fakkan, where lead times of 7-10 days are advised for all grades.

In Saudi Arabia’s Jeddah port, VLSFO and LSMGO supplies are abundant. VLSFO supply is limited in nearby Djibouti, while LSMGO is more readily available there.

Omani ports, including Sohar, Salalah, Muscat, and Duqm, have ample LSMGO supplies with options for prompt delivery possible.

By Tuhin Roy

Photo credit and source: ENGINE
Published: 9 October, 2024

Bunker Fuel Availability

ENGINE: Americas Bunker Fuel Availability Outlook (3 Oct 2024)

Dockworkers’ strike at East and Gulf Coast ports; low demand in Houston; Raizen starts bunker operations off Itaqui.

Published

5 days ago

October 4, 2024

Admin

The following article regarding bunker fuel availability in the Americas region has been provided by online marine fuel procurement platform ENGINE for post on Singapore bunkering publication Manifold Times:

Dockworkers' strike at East and Gulf Coast ports
Low demand in Houston
Raizen starts bunker operations off Itaqui

North America

Dockworkers across the US East and Gulf Coasts ports launched their first major strike in nearly 50 years on Tuesday, raising concerns about potential supply chain disruptions.

While the strike action directly affects container and cargo operations, sources warned that bunkering services may also face indirect delays if barge movements are hindered.

“We haven’t seen an impact on port [fuel] reserves yet, but we’re anticipating disruption,” Stone Oil’s chief operating officer Anthony Odak told ENGINE. The company supplies bunker fuels at ports along the US Gulf Coast.

Prolonged congestion at the ports could also affect the availability of bunker fuel. Although oil and gas shipments are handled through separate operational facilities, disruptions in containerized cargo movements could tighten fuel oil supply chains.

Bunker demand has been very low in Houston for prompt dates. However, the availability of all fuel grades has remained good so far this week. Most suppliers can offer VLSFO and LSMGO stems with a lead time of 5-7 days in Houston.

Bunkering was proceeding normally in the Galveston Offshore Lightering Area (GOLA) on Thursday amid pleasant weather conditions. The weather is forecast to remain calm through the weekend and most of next week. Despite this, bunker demand in GOLA has been very low this week.

The Port of New Orleans, a key Gulf Coast hub for dry bulk commodities like grains, is also experiencing severe delays in loading and unloading ships. These delays are raising shipping costs and risking supply chain disruptions. Prolonged strikes could worsen congestion and further impact industries relying on these trade routes, shipping technology company Signal Ocean stated.

All grades are tight for prompt delivery dates in the West Coast ports of Long Beach and Los Angeles. Most suppliers require more than seven days of lead time to deliver VLSFO and LSMGO stems in both ports.

Bunker fuel availability has not been affected by the ongoing strike action in the East Coast port of New York. Most suppliers are still able to offer VLSFO and LSMGO stems within five days of lead time.

Caribbean and Latin America

Bunker demand has been good in Panamanian ports amid more daily transits through the Panama Canal. Availability has also remained good for prompt dates in both Balboa and Cristobal.

Denmark's The Bunker Firm has launched new bunker operations in Cartagena, Columbia, supplying VLSFO and LSMGO.

VLSFO and LSMGO grades are readily available at Argentina’s Zona Comun anchorage. Demand has picked up this week for both the fuel grades.

Bunker fuel demand has been good in most Brazilian ports this week. VLSFO availability is good in most of the ports, according to most suppliers.

Brazilian energy company Raízen has also launched new bunker operations at Itaqui Outer Anchorage, supplying VLSFO and LSMGO.

By Debarati Bhattacharjee

Photo credit and source: ENGINE
Published: 4 October, 2024