Declining residual fuel stocks in Singapore are leading to a narrowing of the front-month contango in the Singapore low sulfur fuel oil market, according to traders, which is fueling expectations of more incoming LSFO volumes from the West.
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In the high sulfur fuel oil market, continued demand from Saudi Arabia for cargoes over the fourth quarter is expected to trim the length in supply in the Middle East.
MARINE FUEL 0.5% SULFUR
– Morning discussions on the Singapore Marine Fuel 0.5% September/October timespread opened Sept. 14 at minus $1.50/mt to minus $1.80/mt, narrower from the Sept. 11 assessment of minus $2.10/mt, brokers’ indications showed.
– The Singapore Marine Fuel 0.5%S October/November spread has begun recovering due to declining stocks, traders said, in a week when Singapore’s commercial onshore residue stocks fell 6.6% week on week to an eight-month low of 20.735 million barrels, or 3.27 million mt, over Sept. 3-9, Enterprise Singapore data released Sept. 10 showed.
– The stocks draw was attributed to lower inflow of arbitrage cargoes in August. Market sources said stocks in floaters are also declining.
– Demand for low sulfur bunker fuel picked up in the week ended Sept. 11. According to market sources, tight barge availability coupled with a decrease in crude oil values during the week prompted buyers to replenish inventories.
– The Singapore-delivered Marine Fuel 0.5%S bunker premium to Singapore Marine Fuel 0.5% cargo decreased to $15.01/mt on Sept. 11 from $15.60/mt on Sept. 4, S&P Global Platts data showed.
– In the Northeast Asian market, South Korea saw some demand recovery in the week ended Sept. 11 as orders returned after Typhoon Haishen disrupted bunkering activities, while weak refining margins are expected to cap supply as refiners reduce fuel oil output.
– At China’s developing bunkering hub of Zhoushan, demand is expected to remain steady as vessels that used to head to Hong Kong for bunker-only calls now remain at Chinese ports to take bunker fuel post cargo operations to avoid the mandatory 14-day quarantine at Hong Kong port.
– The Zhoushan delivered marine fuel 0.5%S differential to Singapore 10 ppm sulfur gasoil cargo assessments was up from minus $14.48/mt on Sept. 4 to minus $10.21/mt on Sept. 11, Platts data showed.
HIGH SULFUR FUEL OIL
– According to brokers’ indications, mid-morning discussions for the Singapore 380 CST high sulfur fuel oil October/November timespread opened wider at minus $1.25/mt compared to the Sept. 11 assessment of minus 85 cents/mt.
– In spite of Saudi Arabia ceasing its purchases of high sulfur fuel oil from Singapore, the country’s appetite for cargo remains undampened, with state-owned Aramco Trading seeking two to three cargoes per month for delivery at Jeddah over the fourth quarter via tender, market traders confirmed.
– Traders stated that there was a likelihood of cargoes within the Middle East or the Mediterranean meeting the country’s needs due to the lower freight advantage.
– In South Asia, while Bangladesh Petroleum Corp. canceled its buy tender seeking 80,000 mt of marine fuel 0.5%S and 20,000 mt of 180 CST high sulfur fuel oil among other refined products for delivery over H1 2021 “due to unavoidable circumstances”, according to a company statement. A company source said that another tender is likely to be floated “soon” for a similar quantity.
– Traders said that in spite of the “relatively small quantities” of cargo being sought, it could still provide a useful outlet for some excess cargo stock that might build in Singapore.
– Market participants are expecting steady demand for HSFO as Singapore remains one of the few ports allowing crew changes during COVID-19, bunker suppliers based in the city-state said.
– The Singapore-delivered 380 CST bunker premium to Singapore 380 CST HSFO cargo assessments decreased to $16.40/mt on Sept. 11 from $17.51/mt on Sept. 4, Platts data showed.