Delivered prices at the bunker hub of Singapore surged after disruptions to shipping and supplies from the Red Sea raised prices within the energy complex on 22 July.
The Argus-assessed very-low sulphur fuel oil (VLSFO) rose by $45.34/t on the day to $790.15/t dob on 22 July, increasing by 6.1pc on the day and rising by 23pc on the month. Singapore's VLSFO prices last rallied in late May but trended down closer to pre-war levels at $590.42/t dob on 6 July in line with easing crude futures.
Singapore's high-sulphur fuel oil (HSFO) price rose by $42.33/t on the day to $623.58/t dob on 22 July, which was up by 7.3pc on the day and around 33pc on the month.
HSFO prices had also corrected to near pre-war levels in June, and fell further to $429/t dob on 1 July on ample cargo inflows to Asia from countries like Russia and Venezuela.
Meanwhile, prices for low-sulphur marine gasoil (LSMGO) climbed by $82.69/t on the day to $1,258.69/t dob on 22 July, up by 7pc on the day and 38pc on the month.
Asian bunker premiums against cargo prices have climbed in the region since the US-Iran war started, a shipowner said. The delivered premium for Singapore VLSFO price against cargo price stood at $10.27/t ahead of the war on 27 February, but the premium has almost tripled to $28.65/t on 22 July. The HSFO bunker spread was almost flat at a 25¢/t premium against cargo price on 27 February, but the premium has since climbed to around $36/t on 22 July.
Market fundamentals stay mixed
Prior to this rally, ship owners had thin spot demand for July and August in Asia, given a sense of caution and the recent market volatility and ongoing tensions in the Middle East.
On the supply front, second-half July delivered supplies of VLSFO in Asia were largely sufficient. This has shifted compared with supplies of delivered VLSFO in the first half of July when offers rose because of tight prompt-availabilities.
In Singapore, market participants noted that there were no immediate disruptions to bunker supplies. But some suppliers are finding it difficult to provide fuel that is above standard ISO fuel quality specifications and may instead offer grades that just meet the required standards, one buyer said.
There were limited refuelling slots for VLSFO at the port of Singapore in the second half of July because of tight bunkering schedules lined up for incoming ships. This has also supported recent VLSFO prices.
More vessels are also slow steaming to save on fuel consumption, so lesser bunkering trading volumes are required, a trader said. Participants in the freight market are also adopting a wait-and-see approach towards ship movements around the Red Sea.
A wider range of bunker prices has also been seen in the Singapore market since the US-Iran war started, as a result of occasional delays to cargo arrivals depending on suppliers. The wider price range has slowed trading since buyers without urgent requirements would prefer to delay their trades in a backwardated market.
Bunker delivery dates have become an important factor for pricing, market participants said, noting that prompter delivery dates of just two days could warrant a $40/t premium in offer levels.
Bunker sales in the city-state had recovered in June, particularly with more vessel arrivals and lower prices. Firm bunker consumption may continue in July, given that Singapore remains a key bunkering hub, particularly with recent weather disruptions at regional Chinese ports. But overall trading is likely to be weighed on by recent price rallies and cautious buying sentiment in a price-sensitive sector.
