Singapore bunker supply tight despite weak demand

Prompt supplies of marine fuels are becoming increasingly difficult to come by in Singapore's spot market, despite weak demand and stable delivered premiums.

The earliest availability at the port averaged around 10-12 days out this week, up from the usual 5-7 days. The delivered premium for high-sulphur fuel oil (HSFO), or the difference between the delivered-on-board bunker price and wholesale cargo price, has remained stable at an average of $16/t since the start of October.

Supplies of very low-sulphur fuel oil (VLSFO) from the west of Suez to Singapore have fallen to just below 2mn t this month from 2.3mn-2.5mn t in September. But inventories of residues in Singapore remained high at 15.13mn bl for the week ending 14 October, according to official data. "The incoming VLSFO cargo may not be on-specification and in-tank blending is required, which incurs costs. Every buyer has a need for different components to deliver on-specification product as recipes vary and those may be in short supply these days," according to a bunker trader in Singapore.

Strong demand from the container segment may be another reason for the prompt shortage, despite weak demand from other sectors such as dry bulk and tanker.

Bunker suppliers have been trying to meet additional demand from container ships, on top of their term contract requirements. This means there are limited spot supplies available, which are usually reserved for dry bulkers and tankers.

Cargo firms that have delivered bunker operations are providing support to premiums. These companies may be unwilling to offer more supplies on an ex-wharf or cargo basis in order to support barging premiums.

Shipowners and bunker traders have also been increasingly wary of lifting supplies from Singapore bunker supplier Sentek after its owner and managing director was charged two weeks ago for his alleged involvement in bunker oil theft in 2017. Sentek was Singapore's second-largest bunker fuel supplier in 2019.

"This may lead to a halt in operations at some of its barges," according to a supplier. "The overall effect remains muted as some OBS [Ocean Bunkering Services] barges have been sold and are now operating again, which is helping the market," a buyer in Singapore said. OBS was part of Singapore trading firm Hin Leong, which filed for bankruptcy in April this year.

HSFO has also been in short supply, as increasing retrofitted vessels with scrubbers from China hit the market. This additional demand coincides with limited cargo availability as refineries globally curtail production in response to a fall in jet fuel demand, in turn affecting residual fuel output. "Some operators are looking to transfer back to HSFO barges, as premiums are higher and there is less competition compared with VLSFO," according to a trader.

Only about 25pc of HSFO is sold on a spot basis, according to a trader, with the remainder part of long-term contracts. Spot barrels have been increasing their share in overall traded volumes, but lower volumes mean that barge schedules are harder to plan, which is supporting premiums and leading to a price disparity with term barrels.

Consumption of HSFO accounted for 22pc, or 934,000t, of total demand in Singapore in September, according to official data.

Argus assessed delivered prices of VLSFO, low-sulphur marine gasoil and HSFO at $337/t, $346/t and $278/t, respectively, yesterday.

By Sammy Six