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

1 month 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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ENGINE: Europe & Africa Bunker Fuel Availability Outlook (6 Dec 2023)

Bunker fuel availability normal in the ARA; prompt bunker supply tight in Malta and Piraeus; LSMGO tight in Durban and Richards Bay.

Published

8 hours ago

December 7, 2023

Admin

The following article regarding Europe and Africa bunker fuel availability has been provided by online marine fuel procurement platform ENGINE for post on Singapore bunkering publication Manifold Times:

Bunker fuel availability normal in the ARA
Prompt bunker supply tight in Malta and Piraeus
LSMGO tight in Durban and Richards Bay

Northwest Europe

VLSFO availability is said to be normal in the ARA bunkering hub. Lead times of 5-7 days are generally recommended for VLSFO deliveries there to ensure full coverage from suppliers, a source says. However, some suppliers can offer deliveries with shorter lead times.

HSFO and LSMGO availability is also normal in the ARA, the source adds. Recommended lead times for HSFO are 5-7 days, while LSMGO requires a shorter lead time of 3-5 days.

The ARA’s independently held fuel oil stocks averaged 15% higher in November than across October, according to Insights Global data.

The ARA's fuel oil stocks in November increased to their highest monthly level since August. The region imported 210,000 b/d of fuel oil in November, down from 243,000 b/d imported in October, according to cargo tracker Vortexa.

The UK became the biggest fuel oil import source for the ARA hub, accounting for 20% of the region's total fuel oil imports in November, followed by Turkey (17%) and Lithuania (8%). Other import sources were Sweden and Poland, both accounting for 6%.

Meanwhile, the ARA hub’s independent gasoil inventories — which include gasoil and heating oil — fell by 4% in November despite a rise in gasoil imports.

HSFO supply remains tight for delivery off Skaw. Lead times of 7-10 days are recommended for delivery there, a trader says. Meanwhile, availability of VLSFO and LSMGO grades is relatively better, requiring shorter lead times of 5-7 days.

Bunker fuel availability is said to be good in the German port of Hamburg. A trader recommends lead times of 3-5 days for optimal coverage from suppliers there.

Mediterranean

Availability of all bunker fuel grades is said to be normal in Gibraltar. LSMGO and VLSFO grades are available for prompt delivery dates, with recommended lead times of 3-5 days for both grades, a source says. For HSFO, shorter lead times of 2-4 days are recommended.

Adverse weather conditions have prevailed in Gibraltar intermittently over the last week. Strong wind gusts of 20 knots are forecast to hit the port on Wednesday evening. Rough weather conditions are forecast on Friday as well, which could hamper smooth bunker deliveries there.

Bunkering remains limited off Malta due to adverse weather conditions. Bunker operations remained limited to less weather-prone bunkering area four out of the total six bunkering areas on Wednesday, according to the port agent MH Bland. Moreover, availability of all bunker fuel grades is said to be tight there and weather disruptions can cause more delays, a trader says.

Meanwhile, bunker fuel availability is normal across all grades in Istanbul, a source says.

Bunker fuel supply is also normal in the Greek port of Piraeus. But securing prompt deliveries can be slightly difficult there, a trader says.

Bunkering is progressing normally in the Portuguese ports of Lisbon and Sines, where supply of VLSFO and LSMGO grades is normal.

Africa

In South Africa's Durban and Richards Bay, VLSFO availability is said to be normal. Lead times of 5-7 days are recommended for both grades, a source says.

LSMGO availability, however, remains tight in both ports. The grade's deliveries are subject to enquiries there, the source adds.

Offshore bunkering in Algoa Bay has been suspended for three months now. Offshore deliveries there came to a halt in September after the South African Revenue Service (SARS) detained bunker barges over import duty disputes.

Negotiations between offshore bunker suppliers and authorities are underway. A decision is likely to be announced by mid-January, a port agent told ENGINE. However, bunker supply is available in the adjacent Port Elizabeth, where only one supplier is offering deliveries.

Meanwhile, availability of HSFO and LSMGO grades is good in Mozambique's Nacala port, a source says. VLSFO supply is said to be tight there.

Prompt VLSFO supply has been tight in Maputo since last week, while LSMGO is more readily available there.

By Manjula Nair

Photo credit and source: ENGINE
Published: 7 December, 2023

Bunker Fuel Availability

ENGINE: East of Suez Bunker Fuel Availability Outlook (5 Dec 2023)

VLSFO availability tight in Singapore and Zhoushan; bunker fuel availability tight in Tokyo; VLSFO almost out of stock in Omani ports.

Published

1 day ago

December 6, 2023

Admin

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 availability tight in Singapore and Zhoushan
Bunker fuel availability tight in Tokyo
VLSFO almost out of stock in Omani ports

Singapore

Prompt VLSFO availability remains super tight in Singapore. Recommended lead times for the grade range up to 12-16 days. Several suppliers need more than seven days to deliver VLSFO stems in Singapore, a trader says.

At least seven bunker suppliers in Singapore are currently facing tight delivery schedules, a source claims.

HSFO availability also remains tight for both prompt and non-prompt delivery dates in Singapore. Lead times of 14-15 days are recommended for the grade. The grade is even more difficult to secure for stem size of below 500 mt, partly because only a few suppliers can offer them and these are typically priced at steep premiums, a source explains.

LSMGO availability is relatively better than the other two grades in Singapore. Shorter lead times of around five days are recommended for smaller stems, while lead times of more than seven days are recommended for larger stems, a source says.

According to Enterprise Singapore, the port’s residual fuel oil stocks averaged 1% lower in November than in October. Fuel oil imports declined by 20% in November and to their lowest level since May. Fuel oil exports also fell by 22% last month.

Fuel oil cargoes into Singapore primarily arrived from Russia (23% of the total imports), followed by Brazil (10%) and Malaysia (9%) in November, according to cargo tracker Vortexa data.

The port’s middle distillate stocks, however, surged 12% in November.

China, East Asia and Oceania

VLSFO availability remains tight for both prompt and non-prompt delivery dates in Zhoushan. Lack of inflows of VLSFO replenishment cargoes has tightened the supply of the grade there, a source says. Several suppliers are running low on stocks and have refrained from providing lead times. Deliveries of the grade remain subject to enquiries.

In contrast, HSFO and LSMGO availability is normal in the Chinese bunker hub. Lead times of 3-5 days are recommended for HSFO, and 2-4 days for LSMGO.

In northern China, VLSFO and LSMGO supply is good in Dalian. In Tianjin, VLSFO availability is good, but LSMGO and HSFO supply is tight, with deliveries subject to enquiries. In Qingdao, prompt VLSFO and LSMGO availability is limited, and HSFO availability is also subject to enquiry.

VLSFO and LSMGO availability is tight for prompt delivery dates in the southern Chinese ports of Shanghai and Xiamen. HSFO availability is under pressure in Shanghai, as it has been in recent weeks.

Bunker fuel availability is normal in Hong Kong. Lead times of 5-7 days are recommended for all grades in the port, a source says.

Lead times for VLSFO deliveries varied widely between 5-12 days in southern ports in South Korea. Meanwhile, one supplier is able to supply the grade for prompt delivery dates. HSFO requires lead times of 5-10 days.

Bunker fuel availability is normal in western ports in South Korea, where lead times of five days are recommended.

Availability has tightened for all grades in the Japanese port of Tokyo. Lead times of 10-12 days are generally recommended there, up from seven days last week. One Japanese refinery is experiencing delays at one of the product loadings/unloading berths, which has resulted in tight bunker fuel availability in Tokyo, a source says.

Most suppliers in Japan will likely accept new bunker orders until 21 December, before the Christmas and New Year holidays, the source added.

Adverse weather conditions are forecast to hit the Kiwi port of Tauranga on Thursday, which could impact bunkering there.

South Asia

All grades remain in normal availability in India’s Mumbai port. One supplier can supply the grades with lead times of up to two days.

Cyclone Michaung over the southwest Bay of Bengal Sea and the adjoining areas could impact port operations in Bangladesh, according to GAC Hot Port News. Cyclone warning has also been issued in Andhra Pradesh and Tamil Nadu in India. Strong wind gusts of 24 knots are forecast to hit India’s east coast port Visakhapatnam on Tuesday, which could impact bunker operations in the port.

Middle East

Prompt availability remains tight in the UAE port of Fujairah. Lead times of 9-10 days are generally recommended for all bunker fuel grades in the port, slightly up from 7-10 days in the previous week. Bunker demand has been robust in Fujairah, resulting in further tightened supply there, a source says.

VLSFO is almost out of stock in most Omani ports. One major Omani supplier has taken a VLSFO bunker tanker offline because of low demand for the grade and high barge operating costs. This has increased supply pressure on the grade there, a trader says. The grade is only available in the southern port of Salalah in Oman.

LSMGO availability is normal across most Omani ports, including Sohar and Salalah. Lead times of 1-2 days are generally recommended in Sohar.

By Nithin Chandran

Photo credit and source: ENGINE
Published: 6 December, 2023

Bunker Fuel Availability

ENGINE: Americas Bunker Fuel Availability Outlook (30 Nov 2023)

Slow demand in several Americas ports; fog season hits US Gulf Coast bunkering; prompt availability tight in Santos.

Published

6 days ago

December 1, 2023

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:

Slow demand in several Americas ports
Fog season hits US Gulf Coast bunkering
Prompt availability tight in Santos

North America

Demand for all grades has mostly dropped across major bunkering ports in the Americas. But Houston has seen a jump in enquiries for all grades this week. While prompt VLSFO and LSMGO availability was reported tight at the beginning of this week, it returned to normal levels in the port as the week progressed. Lead times of 3-4 days are recommended for both grades. One supplier can offer HSFO stems with 4-5 days of lead time.

Prompt supply of VLSFO and LSMGO is normal in Bolivar Roads. Several suppliers can deliver both grades with 2-5 days of lead times. Similarly, the availability of fuel grades in Beaumont has been good this week.

Bunkering was suspended in the Galveston Offshore Lightering Area (GOLA) and off Corpus Christi in the US Gulf Coast on Thursday due to strong gale-force wind gusts of up 47 knots in the region. Calmer weather is forecast from Friday evening, which could allow bunkering to resume.

A moderate to high risk of fog and reduced visibility is forecast around Corpus Christi, Lake Charles, Port Arthur, Galveston and Freeport from Thursday, which could delay vessel traffic around the region and through the Houston Ship Channel until Sunday, Norton Lilly says.

The channel is a key waterway for vessels going in and out of ports in the Houston area, including Galveston, Baytown and Texas City.

Similarly, a high risk of fog and reduced visibility is also forecast at the New Orleans Outer Anchorage (NOLA). A supplier said they can deliver VLSFO and HSFO stems within three days of lead time if the weather permits.

Availability of VLSFO and LSMGO is good in the West Coast ports of Los Angeles and Long Beach. Several suppliers can deliver both grades with 5-7 days of lead times. However, demand has been extremely low in both ports this week.

VLSFO and LSMGO availability is said to be normal in the East Coast port of New York. Securing HSFO in the port can be difficult for prompt dates. One supplier is unable to offer fuel grades for both prompt and non-prompt dates in New York.

Caribbean and Latin America

The ongoing drought in Panama has led to increased transit delays through the channel, impacting the demand for bunkers in the region. As a result, many shipowners are opting to lift bunkers at alternative ports in the Caribbean region due to the delays in the Panama Canal.

Despite the slowdown in vessel traffic, some suppliers are offering stems with lead times of 5-7 days in the Panamanian ports of Balboa and Cristobal.

VLSFO and LSMGO availability is good for prompt dates off Trinidad and in Jamaica’s Kingston.

Bunker operations have been running smoothly in Argentina’s Zona Comun anchorage so far this week. Availability of VLSFO and LSMGO is normal in Zona Comun. Overall, bunker demand has been muted at the anchorage this week.

Strong winds of up to 31 knots are forecast to hit the region on Friday, which could disrupt bunkering at the anchorage.

Prompt VLSFO and LSMGO availability is tight in Brazil’s biggest port – Santos. Lead times can stretch out to the second week of December, a trader says. Bunker fuel availability appears to be normal in other Brazilian ports like Rio Grande, Rio de Janeiro and Salvador.

By Debarati Bhattacharjee

Photo credit and source: ENGINE
Published: 1 December, 2023