Dangote fuel oil to Singapore crowds out EU supply

Market: Oil products
14/08/24

Rising fuel oil exports from Nigeria's newly-commissioned Dangote refinery are increasingly meeting demand in the world's largest bunkering hub, Singapore, pushing European sellers out of the market even as fuel oil exports from Kuwait — a key Singapore fuel oil supplier — have slowed in recent months.

Singapore is scheduled to receive over 270,000t of low-sulphur straight run fuel oil (LSSR) from Nigeria's 650,000 b/d Dangote refinery in August, Kpler data show. Dirty-petroleum product departures from Africa to Singapore in July were the highest since December 2022, when the Zawia terminal in Libya and Algeria's Skikda terminal supplied a total of 302,000t. Rising output at the Dangote refinery has helped balance VLSFO supply shortfalls from Kuwaiti state-owned KPC's 615,000 b/d al-Zour refinery over the summer, with the majority of product from that refinery landing in Fujairah rather than Singapore in this period.

While African fuel oil volumes heading to Singapore have grown, European exports have reduced in size, with refiners on the continent sending around 445,000t in July. This marks the smallest volume to set off to Singapore from Europe since January 2023, when 284,000t left. So far in August, 135,000t of Dangote's LSSR is on its way to Singapore but no residual product has been chartered from Europe.

European VLSFO demand has been low this year, but refinery margins have strengthened during the summer as output of the 0.5pc sulphur product has been curtailed, and producers have sent excess volumes to Singapore. Port of Rotterdam data show that 747,300t of VLSFO was bunkered in the second quarter of 2024, a near 20pc drop on year-earlier levels. But VLSFO premiums to front-month Ice Brent crude futures hit nearly $4/bl on 13 August, their widest premium since mid-April, as scarcer supply is outweighing lacklustre demand.

Steady Singaporean marine fuel demand combined with sinking west to east freight rates could incentivise increased European lower-sulphur fuel oil production for foreign consumption. Dirty product freight rates between the Mediterranean and Singapore for 135,000t vessels hit a near 10-month low of $29.26/t on 2 August. On the same day, the spread between month two fob Singapore VLSFO cargo swaps and fob northwest Europe VLSFO barge price assessments reached $58/t, the widest differential since early December, leaving room for exporters to the region to make a sizeable profit even after accounting for freight costs.

But European sellers may be more easily able to reach Singaporean buyers later this year. KPC is expected to carry out maintenance at its 615,000 b/d al-Zour refinery's atmospheric desulphurisation units in the fourth quarter, according to a source close to the refinery's operations, which will tighten overall low-sulphur marine fuel supply in Asia-Pacific, inviting imports from further afield.

Secondary units at the Dangote refinery are due to come online imminently too, with the result being lower volumes of straight-run residual product made available for export because more product is being upgraded. But, depending on when this occurs, the result could be a steady flow of LSSR to Singapore in the intervening period.

By Bob Wigin

Fuel oil exports signalling for Singapore 000 t

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