SINGAPORE: Low-sulfur fuel oil supplies at Singapore have tightened on reduced output from refineries and declining sweet crude imports, trade sources and analysts said, driving up refueling costs for shippers at the world’s largest bunkering port.
Spot premiums for very low sulfur fuel oil (VLSFO), or fuel oil with maximum 0.5 percent sulfur content, breached $58 per metric ton to Singapore quotes on Tuesday, hovering at over a four-month high, Reuters data showed.
Premiums for delivered bunker fuel in Singapore held well above $100 per ton this week for prompt delivery dates, trade sources said.
Oil supply uncertainties following the US-Iran war have largely driven up marine fuel costs for ships globally.
“Current price strength is likely to extend into September as low-sulfur blending components and heavy-sweet crude arrivals remain limited,” said Emril Jamil, a senior research manager at Kpler.
Blendstocks are added to marine fuels to meet certain specifications. This includes certain heavy-sweet crudes from countries like Sudan, Brazil and Australia.
Heavy low-sulfur crudes arriving in Singapore and Malaysia totalled about 475,000 tons in July, down from 663,000 tons in June, Kpler data showed, while August arrivals are estimated at about 428,000 tons.
“Given the current crude supply anxiety, more barrels are being absorbed into the refinery complex instead of low-sulfur fuel blending,” Jamil added.
Other blendstocks like low-sulfur straight-run fuels remained limited as refineries prioritize output of other transportation fuels with higher margins, trade sources and analysts said.
“Refineries will be facing more difficulties in producing more VLSFO,” said June Goh, senior oil market analyst at Sparta Commodities. “The crude shortfall is real as we head into September processing and medium crude re-supply options are getting limited in Asia.”
SINGAPORE PRICES ABOVE OTHER ASIAN PORTS
The tighter VLSFO supply expectation has boosted premiums for marine fuel in Singapore to levels higher than other Asian ports in recent weeks.
For prompt dates, it costs at least $50 per metric ton higher for ships to refuel with VLSFO in Singapore versus China ports like Zhoushan and Shanghai, trade sources said.
VLSFO supplied at other regional ports like Hong Kong, South Korea and Tokyo were also at lower premiums versus Singapore recently, sources added.
A bunker purchaser from a shipping company said while vessels are unlikely to specially divert over to China to take cheaper bunkers, ships will try to take more volumes at Zhoushan if they are already in the area.
A fuel trading manager expects overall spot demand for marine fuel to soften as shipowners buy more prudently amid the high premiums across Asia ports.
