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 year 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 (22 Jan 2025)

VLSFO supply normal in the ARA; rough weather in Las Palmas; LSMGO available again in Durban.

Published

6 hours ago

January 23, 2025

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:

VLSFO supply normal in the ARA
Rough weather in Las Palmas
LSMGO available again in Durban

Northwest Europe

Securing very prompt delivery dates for HSFO may be a challenge in the ARA. Lead times of around 5-7 days are advised, a trader told ENGINE. VLSFO and LSMGO availability is comparatively better, with recommended lead times of 3-5 days.

The ARA hub’s independently held fuel oil stocks have increased by 9% so far this month compared to December, and are at their biggest since June 2024, according to Insights Global data.

The region has imported 224,000 b/d of fuel oil so far this month, registering an increase from 161,000 b/d imported in December, according to data from cargo tracker Vortexa.

Saudi Arabia (29% of the total) has emerged as the region’s biggest fuel oil import source this month. The UK (19%), Poland (16%), Germany and Lithuania (8% each) and Algeria (5%) were other major import sources this month.

Meanwhile, the ARA's independent gasoil inventories - which include diesel and heating oil - have surged by 16% to their highest since February 2021. It has imported 163,000 b/d of gasoil and diesel so far this month, down from 238,000 b/d imported in December, according to Vortexa data.

In Germany’s Hamburg, all grades are well stocked, a trader told ENGINE. Recommended lead times are 3-5 days.

Mediterranean

Availability is normal in Gibraltar with lead times of around five days recommended for HSFO, VLSFO and LSMGO, a trader said. Suppliers in the port are still grappling with a backlog of vessels from last week due to bad weather causing congestion, according to port agent MH Bland. Strong congestion is also reported at Algeciras’ inner anchorage, MH Bland said. Supplier delays are reported in both ports.

Bad weather could hit bunkering in the Gibraltar Strait ports on Monday, according to a source.

Bunkering has been partially suspended by strong winds gusts in Huelva since Monday. Barge deliveries can still take place in the anchorage area and a full restart is expected from Thursday, MH Bland says.

Rough weather is reported in the Canary Islands’ port of Las Palmas, a trader told ENGINE. Adverse weather is likely to continue until 30 January and trigger bunker disruptions, the trader said. This has stretched lead times for VLSFO, LSMGO and HSFO in Las Palmas to 7-10 days now.

Meanwhile, low bunker demand is reported in other Mediterranean locations such as Piraeus, off Malta and Istanbul, according to a trader.

Piraeus has normal availability for LSMGO and VLSFO, while HSFO is subject to enquiry, the trader said. Recommended lead times of around 3-5 days are recommended for optimal coverage.

Bunkering is proceeding smoothly off Malta so far this week. Adverse weather triggered disruptions last week, but no backlogs have been reported, a source said. Around 3-5 days of lead time is advised for now, but that could soon change as inclement weather may hamper bunkering off Malta on Thursday and Friday.

In Turkey’s Istanbul, bunker availability is good for all main fuel grades, a trader said. Suppliers can offer with lead times of 3-5 days.

Africa

In the South African ports of Durban and Richards Bay, VLSFO supply is still tight with lead times of 7-10 days recommended.

LSMGO supply has now resumed in Durban after suppliers in the port ran dry in the last week of December. But availability is still very tight, with recommended lead times of more than seven days for optimal coverage.

VLSFO, LSMGO and HSFO supply is normal in Mauritius’ Port Louis, a trader said. Suppliers are able to offer prompt delivery dates.

Off Namibia's Walvis Bay, VLSFO and LSMGO grades are well supplied and are high in demand, a source said. Demand is moderate for HSFO, and supply is running a bit tight. Lead times of around five days are recommended for all these grades.

By Manjula Nair

Photo credit and source: ENGINE
Published: 23 January, 2025

Bunker Fuel Availability

ENGINE: East of Suez Bunker Fuel Availability Outlook (21 Jan 2025)

VLSFO and HSFO availability tight in Singapore; availability good across all grades in Sri Lankan ports; bunker demand low in Fujairah.

Published

1 day ago

January 22, 2025

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 and HSFO availability tight in Singapore
Availability good across all grades in Sri Lankan ports
Bunker demand low in Fujairah

Singapore and Malaysia

VLSFO availability in Singapore remains tight, with standard lead times of 7-11 days. HSFO lead times are steady at 7-9 days, while LSMGO lead times have shortened to 5-7 days from 3-9 days last week.

According to Enterprise Singapore, residual fuel oil stocks in Singapore have averaged 7% lower this month compared to December, falling below 21 million bbls. This drop coincides with a 6% decline in net fuel oil imports in January. Fuel oil imports increased by 493,000 bbls, and exports surged by 793,000 bbls.

Middle distillate stocks in Singapore - which include gasoil - have averaged 13% lower so far this month.

At Malaysia’s Port Klang, VLSFO and LSMGO supplies are abundant, with prompt small-quantity deliveries readily available. HSFO supply, meanwhile, remains limited.

East Asia

In Zhoushan, lead times for VLSFO and LSMGO have increased from 3-5 days last week to 5-7 days now, while HSFO lead times remain steady at 5-7 days.

In northern China, Dalian and Qingdao ports maintain ample supplies of VLSFO and LSMGO, but Qingdao is experiencing limited HSFO availability. Tianjin faces tight supplies of both HSFO and VLSFO, while LSMGO availability remains stable.

In Shanghai, LSMGO is readily available, while supplies of VLSFO and HSFO are restricted. Fuzhou enjoys robust availability of both VLSFO and LSMGO, whereas Xiamen has strong VLSFO supply and limited LSMGO availability.

At Yangpu and Guangzhou, prompt deliveries of both VLSFO and LSMGO remain constrained.

The upcoming Chinese New Year holidays, from 28 January to 4 February, will result in reduced bunker activity at Chinese ports, as most suppliers will not accept new orders during this period. Stems should generally be booked by 24 January, ahead of the holiday, a source says.

In Hong Kong, lead times for all fuel grades remain steady at approximately seven days, unchanged from recent weeks. However, adverse weather conditions expected on Wednesday could disrupt bunker deliveries.

In Taiwan, VLSFO and LSMGO supplies remain stable at Hualien and Taichung ports, with lead times of about two days, unchanged from last week. In Keelung, a lead time of 2-3 days is recommended. At Kaohsiung, VLSFO lead times are around two days, but LSMGO deliveries remain difficult due to ongoing barge maintenance since late December.

Bunkering operations at several Taiwanese ports will be temporarily suspended during the Chinese New Year holidays from 28 January to 4 February. Keelung, Taichung and Suao ports will halt bunkering from 28-30 January, while Hualien port will be closed from 28-31 January. Bunkering at Kaohsiung port will continue as usual during the holidays, according to CPC Corporation.

Stems must generally be booked by 24 January ahead of the holiday period, a source reported.

All fuel grades remain readily available at South Korean ports, with several suppliers advising lead times of 3-6 days. However, intermittent rough weather expected over the weekend could disrupt bunkering operations at Ulsan, Onsan, Busan, Daesan, Taean and Yeosu.

In Japan, VLSFO is readily available at major ports, including Tokyo, Chiba, Yokohama, Kawasaki, Osaka, Kobe, Sakai, Nagoya and Yokkaichi, though prompt supply remains limited in Mizushima. LSMGO supplies are stable overall, but prompt deliveries are challenging to secure at Tokyo, Chiba, Yokohama, Kawasaki, Osaka, Kobe, Sakai, Nagoya, Yokkaichi and Mizushima.

HSFO availability is tight across all ports, while in Oita, all fuel grades are subject to availability.

Subic Bay in the Philippines may face intermittent inclement weather throughout the week, which could disrupt bunkering operations. Similarly, adverse weather is expected to impact bunkering in Vietnam's Ho Chi Minh City on 24-25 January, and in Hai Phong on 26 January.

Oceania

In Western Australia, Kwinana, Fremantle and Kembla ports have plentiful VLSFO and LSMGO supplies, with standard lead times of 7-8 days. In New South Wales, Sydney offers normal LSMGO availability, although HSFO may require extended lead times.

Suppliers in Australia's Victoria, Melbourne and Geelong maintain abundant VLSFO and LSMGO stocks, but prompt HSFO deliveries remain difficult to secure. In Queensland, Brisbane and Gladstone have adequate VLSFO and LSMGO supplies, also with lead times of 7-8 days, but HSFO availability in Brisbane is constrained.

In New Zealand, Tauranga and Auckland hold sufficient VLSFO stocks, with Auckland also offering ample LSMGO availability. However, rough weather forecast for Tauranga on Wednesday could disrupt bunker operations.

South Asia

VLSFO and LSMGO availability remains limited at several Indian ports, including Kandla, Mumbai, Tuticorin, Chennai and Cochin, consistent with recent weeks. Both grades are subject to availability at Visakhapatnam, while a supplier in Paradip and Haldia is nearly out of stock. Adverse weather conditions at Kandla and Sikka ports may disrupt bunker operations between 24-25 January.

In Sri Lanka, Colombo port recommends lead times of approximately six days for all grades, consistent with last week. At Hambantota, lead times for all grades have increased from about two days last week to around six days now.

Middle East

In Fujairah, prompt availability remains tight despite weak demand, with lead times for all grades holding steady at 5-7 days, unchanged from last week. Similarly, suppliers in Khor Fakkan are recommending lead times of 5-7 days for all grades.

In contrast, Jeddah port in Saudi Arabia has adequate supplies of both VLSFO and LSMGO. While VLSFO supply in Djibouti is under pressure, LSMGO is more readily available.

Omani ports, including Sohar, Salalah, Muscat and Duqm, have ample LSMGO supplies and prompt deliveries available.

By Tuhin Roy

Photo credit and source: ENGINE
Published: 22 January, 2025

Bunker Fuel Availability

ENGINE: Americas Bunker Fuel Availability Outlook (16 Jan 2025)

Prompt availability good in New York; rough weather in Houston causes delays; high wind gusts hit bunkering in Zona Comun.

Published

6 days ago

January 17, 2025

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:

Prompt availability good in New York
Rough weather in Houston causes delays
High wind gusts hit bunkering in Zona Comun

North America

Bunker fuel availability in Houston remains tight across all grades. High winds over the last few days have created some backlogs by delaying bunker deliveries in the port. The situation is expected to remain the like this until 21 January.

An "Arctic Front will impact Houston area starting Saturday morning with high winds / cold temps [temperatures] and possible freeze," a source says. The pumping rates on barges are likely to be much lower than normal due to cold temperatures, the source adds.

There are enough supply volumes to go around in the port. That is not really the issue, a source says, the issue is more to get into suppliers' delivery schedules and for stems to be delivered without weather delays.

Bunker operations in the Galveston Offshore Lightering Area (GOLA) could be disrupted by high wind gusts on and off until 20 January, with deliveries happening on a case-by-case basis. Operations are expected to resume fully between 16-18 January and then be suspended on 19 January, a source says.

On the East Coast, availability for VLSFO and LSMGO is good in New York, but bunker operations may face disruptions this week due to high wind gusts, causing potential delays in deliveries, a source said. Tugs are kept on standby for urgent requirements.

Last week, shipping company A.P. Moller-Maersk had issued an advisory to its customers stating that the conditional agreement on US wages is set to expire on 15 January, possibly leading to a coast-wide strike on 16 January, if no agreement was reached by that date.

To clarify, bunker suppliers across US East Coast and Gulf Coast ports have not reported any disruptions from a workers' strike, and deliveries are underway, according to multiple sources.

Prompt bunker availability has improved in Los Angeles and Long Beach in January, with suppliers advising lead times of less than seven days for all fuel grades.

Caribbean and Latin America

Suppliers have seen strong demand in the Panamanian ports of Balboa and Cristobal, amid tight availability across most fuel grades. Suppliers require lead times of more than seven days to secure stems.

Suppliers in the Colombian ports of Santa Marta, Barranquilla and Cartagena have seen good demand, and tighter availability. January is the month with the highest demand, a source says.

Bunker operations at Argentina’s Zona Común anchorage may face some disruptions due to bad weather conditions and strong wind gusts between 17-19 January. Prompt VLSFO availability is tight at the anchorage, with lead times of at least seven days advised, a source said.

In Bahía Blanca, supply capacity has been reduced because of low barge availability since December. Bahía Blanca is a major wheat export hub.

Meanwhile, Brazilian ports reported strong demand in January, with ample availability across most fuel grades.

By Aparupa Mazumder

Photo credit and source: ENGINE
Published: 17 January, 2025