Singapore bunker premiums fall to record lows

Weak demand, new entrants to the market and competitive bunker offers from oil majors are dampening delivered premiums of bunkers in Singapore.

The premium of delivered very-low sulphur fuel oil (VLSFO) over cargo prices fell to a record low of $5.75/t on 17 March, according to Argus data. The premium of delivered high-sulphur fuel oil (HSFO) over cargo prices also declined, to an even lower $3.25/t yesterday, also according to Argus data.

These low delivered premiums resulted from weak demand for ship fuel in the city-state.

"Premiums are really low these days, and the market has been too quiet for a long time now," said one local supplier.

Argus reported an average of nine spot deals so far this week, down from an average of 13 last week. Argus on 17 March assessed VLSFO, HSFO and low-sulphur marine gasoil lower on the day, despite firmer Brent crude futures at 4.30pm in Singapore and fuel oil paper values.

"Crude prices are rising, but bunker prices are not revised upwards to the same extent," said the same supplier.

Competitive prices from some companies are another cause for the low delivered premiums, with ex-wharf values sometimes below that of delivered fuel. Oil majors, who have several competitive advantages relative to their smaller counterparts such as being vertically integrated and having easier access to credit, are also drivers of price in the port.

New entrants to the market are pressuring incumbent companies, intensifying the already-competitive landscape in the world's largest bunker hub. "Some of these companies prioritise gaining market share fast rather than competing on price," said another local trader.

"The situation is similar for gasoil, with majors going all in on the delivered side when they deem ex-wharf premiums unattractive and vice versa," according to another local supplier. "Now more than ever, companies will need to invest in new equipment, technology and peoples' skill set and knowledge to overcome this volatile and uncertain environment characterized by low demand and upcoming alternative fuels."

"The majors will be dominant, but they will still need to outsource part of the supply chain service such as barging and frontline services," he added.

Singapore's total bunker sales in 2020 rose by 5pc to 49.83mn t, with 44 licensed suppliers, according to data from the Maritime and Port Authority.

By Sammy Six