Tight Singapore VLSFO supplies lift bunker prices

Market: Oil products
28/08/24

Bunker prices for very-low sulphur fuel oil (VLSFO) at the port of Singapore rallied in end-August, bolstered by tight supplies and steady gains in Ice Brent Singapore crude futures.

The VLSFO prices rose by 4.7pc on the day and 3.5pc on the year to $656/t on a delivered on board (dob) basis on 27 August, as tight spot availability for the first half of September lifted fuel premiums. Singapore's VLSFO bunker prices were last assessed higher at $668.50/t dob on 30 January.

Prices for prompt seven days' laycan versus mid-September delivery for VLSFO saw a backwardation of $25/t as limited barges and tight VLSFO supplies pushed prices higher. Prices for the next seven days' laycan were assessed at about $670-680/t on a dob basis in Singapore, while deliveries for mid-September were indicated at around $645-655/t dob basis.

Limited blendstock components and stronger Chinese import demand have led to a near-term VLSFO supply crunch and supported increases in Singapore cargo prices from late August. Furthermore, domestic Chinese refineries reduced run rates because of limited VLSFO export quotas, resulting in higher VLSFO bunker prices in China and increased demand for imported fuel to meet domestic bunkering requirements.

Meanwhile, limited VLSFO cargo availability, coupled with delays in loading at the port of Singapore, have raised VLSFO premiums on an ex-wharf and delivered basis over the past week. Delays in VLSFO cargo deliveries and delayed loadings at port terminals forced buyers to pay a premium for VLSFO bunker fuel delivered before 10-15 September, one trader said.

"Zhoushan is much cheaper than Singapore so demand is moving there," another trader said, adding that some Singapore-based suppliers expect tight spot availability until October, overturning earlier expectations of limited availability until mid-September.

Singapore's scrubber-spread — the price difference between VLSFO and high-sulphur fuel oil (HSFO) for bunkering — has widened to almost a six-month high of $174/t on 27 August because of the current rally in VLSFO prices. The scrubber spread is a key indicator of margins for bunker buyers with exhaust scrubber systems installed on their ships. A wider scrubber-spread would reflect higher cost savings while maintaining low carbon emissions when using HSFO instead of VLSFO for refuelling vessels.

The tight supply of VLSFO also impacted the marine biodiesel market, with B24 prices in Singapore rising to $732.5/t on a dob basis at the close of 27 August, an increase of $35/t compared with the level on 20 August.

By Cassia Teo

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