A shortage of high-sulphur fuel oil (HSFO) supplies in Singapore and quality issues with several cargoes are keeping delivered premiums for bunkers at the port at elevated levels.
Supply availability of HSFO has been tight for over a month now, with delivered prices over cargo values averaging $21.12/t from the start of September until yesterday. Delivered premiums typically average about $10/t.
Record-high natural gas prices from Europe to Asia are incentivising some power generation companies to switch to burning HSFO instead.
The marine industry no longer drives the bulk of demand for HSFO since the International Maritime Organization (IMO) implemented its 0.5pc sulphur cap for marine fuels from 1 January 2020. Only vessels with scrubbers installed can burn HSFO, the prices of which are increasingly driven by power market price dynamics.
HSFO availabilities for bunkering in Singapore are likely to remain tight as less exports from Europe are sent to Asia given the approaching winter in the northern hemisphere.
"There is no lack of HSFO barges in the port, but the lack of oil is leading to congestion at certain terminals," said a local bunker fuel trader.
"Demand for HSFO is growing as more scrubber-equipped vessels are coming on line, and we are certainly seeing more enquiries than a couple of months ago," one Europe-based bunker fuel broker said.
The tightness and resulting high prices and premiums are not restricted to Singapore, with these also seen at other ports in Asia such as China and South Korea where HSFO is increasingly burned for power generation. Buyers therefore do not have many options to bunker elsewhere.
Meanwhile, quality issues such as high water and high catfines are exacerbating the situation. "Several cargoes have arrived in Singapore that are off-spec and that is causing delays to reloading them as on-spec finished grade," said another local bunker trader.
