Asian HSFO markets firm on higher power, bunker demand
The backwardation in the Asian 180cst and 380cst high-sulphur fuel oil (HSFO) markets has widened to multi-month highs, driven by higher power generation and bunker fuel demand.
The backwardation in 180cst HSFO markets, or the premium of prompt prices to forward values, widened from $5.75/t on 3 August to over a nine-month high of $6/t yesterday, with it last at this level on 15 October 2020, according to Argus' assessments. Asian 180cst margins against Dubai crude values also strengthened to a three-month high of -$5.63/t yesterday, the highest since -$5.40/bl on 7 May. The backwardation in 380cst HSFO markets widened from $4.25/t on 3 August to over an eight-month high of $5.25/t yesterday. It was last wider on 13 November 2020 at $6.75/t.
Increased support for 180cst HSFO markets has come from higher demand from Pakistan's state-owned PSO for August- and September-delivery cargoes because of higher temperatures and lower hydroelectricity availability. PSO has sought six 65,000t (419,300 bl) 180cst HSFO cargoes, or 390,000t (2.51mn bl), for August and September delivery, two of which have been purchased. PSO has also received offers for another two cargoes, which it will decide whether to accept over the next few days. PSO's current demand is well above year-earlier levels when it bought 130,000t of HSFO for September 2020 delivery and sought an unconfirmed volume for August delivery, though the results for that tender could not be confirmed.
Kuwait's state-owned KPC also bought heavy fuel oil (HFO) with a maximum 380cst viscosity for July-September delivery, a reversal from last year when it was selling cargoes, as new fuel oil cracking units, part of state-owned KNPC's Clean Fuels Project, have significantly reduced fuel oil production capacity. KPC bought at least one 80,000t (516,000 bl) cargo of maximum 380cst HFO for delivery each month from July-September, compared with last year when it sold one 80,000t HFO cargo each for loading in July and August and 120,000t (774,000 bl) for loading in September 2020.
Kuwait has imported nearly three times as much fuel oil this year than it did in all of 2020 as of June. But imports may fall when the 615,000 b/d al-Zour refinery comes on line, which has been configured to produce as much as 215,000 b/d of fuel oil at full capacity – though al-Zour might not begin operations before December. The September-October backwardation in both HSFO markets also widened to over 1½-year-highs, the highest since 23 January 2020. The 180cst spread widened from $5.50/t on 3 August to $6/t yesterday, with it last higher at $7.75/t on 23 January 2020. The 380cst spread widened from $5/t on 3 August to over a 1½-year high of $5.75/t yesterday, with it last higher at $6/t on the same day.
Rising HSFO demand for power generation has limited availability of the product for the bunker market in Singapore, said several local bunker traders. Prompt deliveries of HSFO bunkers are therefore tight, with average lead times of up to about nine days compared with the more typical six or so days. "Suppliers of HSFO are not willing to improve their offers given limited supplies," said a local trader. But barge availabilities have been observed as largely normal, another trader said.
Demand for HSFO-grade bunkers in Singapore has been strengthening over the past few months, in line with a higher premium of very low-sulphur fuel oil (VLSFO) to HSFO, which incentivises scrubber construction. The Hi-5 spread — the premium of VLSFO to HSFO — averaged $115/t over the first seven months of this year compared with $65/t during the last quarter of last year.
Solid demand for HSFO in Singapore is reflected in the city state's official bunker consumption data, which show that roughly one in every four barrels sold remains of the high-sulphur grade.
Argus reported an average of 2.07 HSFO spot deals each day in June and July, up from 0.87 over the first five months of this year.
Delivered premiums of HSFO, or the premium of bunker prices to cargo values, averaged $6.22/t in July, up slightly from $5.74/t in June, according to Argus' data.
Related news posts
Colombia's electricity woes add to unrest against Petro
Colombia's electricity woes add to unrest against Petro
Bogota, 22 April (Argus) — Colombians took the streets of major cities and towns across the nation on Sunday to protest mainly against health, pension and labor changes, but potential power outages are also creating discontent. Authorities estimated that about 250,000 Colombians marched in widespread protests, sparked by changes in healthcare. Congress in April had rejected President Gustavo Petro's proposals in the sector, and the government the next day seized the two largest private-sector health insurers. Protesting healthcare workers say the government did this to implement changes through a back channel. "Regulatory noise and risk are likely to remain high amid announcements, proposals, and measures [that do not require congressional approval], aimed at changing the game's rules in strategic sectors," brokerage Credicorp Capital said. Colombians also protested being on the verge of electricity rationing like that in neighboring Ecuador as hydroelectric reservoirs remain at record-low levels. Several unions and other associations have long warned the Petro administration to take measures to offset the effects of the El Nino weather phenomenon. Electricity distributors last year called for allowing bills for energy purchased on the spot market to be deferred and for loosening price index rules, among other proposals. The national business council sent at least three letters to the president on the issue. At least nine separate letters calling for preparation to prevent blackouts were sent to the president and ministers. Several actions were only recently implemented . "There are no risk of electricity rationing in Colombia," former energy minister Irene Velez said in 2023. "We do not understand why some people are interested in generating panic." Government weather forecasts also overestimated rainfall expected for March, leading hydroelectric plants to use more water in the reservoirs than they otherwise would have, said director of the thermoelectric generation association (Andeg) Alejandro Castaneda. Reservoir levels stood at 29.5pc today, rising thanks to rains since 19 April, up from 28.75pc on 18 April. Electricity rationing is set to begin when reservoirs drop below 27pc, according to grid operator XM. By Diana Delgado Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
German products demand up on supply concerns
German products demand up on supply concerns
Hamburg, 22 April (Argus) — German demand for heating oil and fuels rose sharply in the past week, with consumer concerns that conflict in the Middle East could restrict product availability were coupled with falling domestic product prices. Spot trade of heating oil, diesel and E5 gasoline submitted to Argus reached their highest weekly averages since the start of the year. The last time this amount of heating oil was traded was in December last year, and for gasoline and diesel it was at the beginning of October. Gasoline demand surged particularly in the Emsland and South regions, and middle distillates were primarily traded in Rhine-Main and Southwest. The missile attack by Iran on Israel on 13 April and Israel's drone attack on Iran on 19 April have heightened concerns of further escalation. An open conflict between Iran and Israel could affect supply of crude and gasoil from the Middle East by threatening major shipping routes of the Suez Canal, the strait of Hormuz and the eastern Mediterranean. These concerns led some German consumers to fill their tanks. Concurrently, product prices have fallen across Germany, further stimulating demand. Refineries in Karlsruhe and Neustadt-Vohburg have drawn buyers with fuel oil and gasoline prices below the German average. Heating oil at Miro's 310,000 b/d Karlsruhe traded at more than €2/100l below the national average, while gasoline at Bayernoil's 216,000 b/d Neustadt-Vohburg traded at a discount of almost €6/100l to the same average. By Johannes Guhlke Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
TUI Cruises receives methanol-ready ship
TUI Cruises receives methanol-ready ship
New York, 18 April (Argus) — Cruise ship company TUI Cruises took delivery of a methanol-ready cruise ship which will start operations at the end of June. Methanol-ready vessels allow ship owners to easily retrofit their vessels to burning methanol in the future. The 7,900t deadweight Mein Schiff 7 will operate in the North Sea, the Baltic Sea, along the European Atlantic coast and in the Mediterranean and run on marine gasoil (MGO). It was built by Finland's Meyer Turku shipyard. In January, TUI Cruises signed a memorandum of understanding with trading company Mabanaft for future supply of green methanol. Mabanaft would cover TUI's methanol needs in northern Germany, and gradually add other European locations. Grey methanol was pegged at $717/t MGO equivalent and biomethanol at $2,279/t MGOe average from 1-18 April in Amsterdam-Rotterdam-Antwerp. About 0.9 times and 2.9 times, respectively, the price of MGO, Argus assessments showed. TUI Cruises is a joint venture between the German tourism company TUI AG and US-based cruise ship company Royal Caribbean. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Germany delays HVO and B10 sales at fuel stations
Germany delays HVO and B10 sales at fuel stations
Hamburg, 18 April (Argus) — HVO and B10 will not be available for sale at German fuel stations until the end of April at the earliest, the environment ministry BMUV told Argus . The biodiesels were previously expected to be on sale from mid April, but the relevant amendment to the 10th Federal Immission Control Ordinance (BImSchV) still needs signatures from the heads of the three federal ministries involved — environment, transport and economics — and the German chancellor, after which it can be published in the Federal Law Gazette. The new regulations can come into force one day after publication. When this happens HVO100 and B10 diesel will be available for sale at German fuel stations. By Max Steinhau and Nik Pais dos Santos Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more