High-sulphur fuel oil (HSFO) bunker prices in Singapore have fallen to near pre-war levels against a backdrop of easing US–Iran tensions and expectations of increased cargo inflows to Asia.
Spot trading has picked up, and more shipowners have made enquiries this week. But shifting shipping routes and energy price uncertainty could cap demand in the near term.
Shipowners are likely to still prefer Singapore as a bunkering destination, with Singapore's HSFO prices falling to a discount of about $30/t against Zhoushan levels on 17 June.
Competitive bunker prices at other regional ports like Zhoushan and Shanghai in May had drawn some bunker demand away from Singapore. Singapore's HSFO prices were near parity to Zhoushan in May, at about a $2-3/t discount on average.
But Singapore's HSFO prices fell by $22.67/t on the day to $461.83/t dob on 17 June and slid by 29pc from $650/t dob on 2 June. This sends delivered HSFO prices to around $32/t above pre-war levels, when prices had averaged to around $430/t dob in February.
Demand for HSFO has been firm since the start of June "since premiums collapsed" given market expectations that the US-Iran peace deal may go through, a Singapore-based trader said, adding that buyers also had "decent" requirements of about 1,000-2,000t for spot stem volumes.
Looking forward, any further increases in HSFO demand, especially from scrubber-fitted vessels, is likely to be capped, depending on vessel movement and geopolitical developments. Shipowners have remained cautious about the potential US-Iran deal, with freight participants preferring to wait for safety assurances for transiting through the strait of Hormuz.
A physical supplier in Singapore said that HSFO demand has been "quite steady" for them in June, with no significant increase in demand despite the downtrend in prices.
There is "not a huge uptick in [Singapore] just yet at our end, but let's see [the] coming days", a trader said. In recent months, more ships have travelled to the west of Suez instead of the east given geopolitical unrest, another trader noted.
In contrast, prices for very-low sulphur fuel oil (VLSFO) in Singapore have remained supported because of an acute shortage of blendstock components and lack of supplies from Kuwait's 615,000 b/d al-Zour refinery. Singapore's VLSFO bunker prices rose by $3.30/t on the day to $620.91/t dob on 17 June, which is almost $137/t above pre-war levels in February.
Overall spot trading in Singapore's bunker market has been sluggish because of elevated prices, and tepid demand also resulted in some firms scaling down their Singapore fuel oil storage capacities because of underutilisation and weak storage economics.
HSFO supplies still ample in Asia
Asian HSFO supplies are expected to remain ample despite the peak summer season in June. Singapore is set to have cargo arrivals from Russia and Venezuela, which could lead to an overall surplus in HSFO availability and weigh on market prices.
With the ongoing progress in peace negotiations between the US and Iran, HSFO bunker prices in Singapore are likely to ease further in the near-term on bearish market sentiment, and if more Iranian oil returns to the mainstream fleet once sanctions are lifted.
The US and Iran have signed a memorandum of understanding (MoU) to end the war on 18 June, signalling the start of efforts to reopen the strait of Hormuz.
Delivered HSFO supplies in Singapore had tightened shortly after the US-Iran war started in late February, given that more buyers had rushed to secure supplies on concerns of supply disruptions, since Middle East volumes made up about 40pc of Singapore's monthly imports. But HSFO bunker availability has recovered since April, as suppliers drew from earlier inventories and floating storages around the straits.
