Singapore HSFO bunker premiums ease with higher inflows

The premium of high-sulphur fuel oil (HSFO) bunkers in Singapore has retreated to more typical levels, after spiking from April onwards because of several buyers suffering from lifting contaminated fuel.

The premium surged to $89/t on 12 April, which are levels not seen since the International Maritime Organisation's (IMO) sulphur mandate came into effect in 2020, according to Argus data.

But the premium has cooled down considerably over the past few days and was assessed at $18.50/t on 25 May, which was more in line with its longer-term average.

Outright prices for HSFO bunkers in Singapore on 25 May fell by $6.50/t to $$647.50/t from the previous day. This was despite firmer crude and fuel oil paper prices that boosted prices of the other two grades, namely very-low sulphur fuel oil (VLSFO) and low-sulphur marine gasoil (LSMGO).

A build-up of HSFO supply in Singapore this month has been depressing bunker prices, market participants said. Inflows to Singapore from the west of Suez and the Mideast Gulf are at a seven-month high of 1.82mn t (378,700 b/d) this month, last being higher at 2.02mn t (419,500 b/d) in October 2021, according to Vortexa data.

The UAE is the main origin of HSFO cargoes expected to arrive in Singapore in May, accounting for 23pc or 417,500t (86,900 b/d) of the inflows. Iran is the second-highest exporter of HSFO to Singapore this month, accounting for 11.8pc or 214,700t of the inflows. The Mideast Gulf has been taking more cheap Russian fuel oil, owing to Western sanctions on Russian oil imports, resulting in surplus cargoes available for export to Singapore, traders said.

The surge in inflows to Singapore could have partially been because of a spike in delivered bunker premiums here owing to contamination issues previously, a bunker trader added.

With the influx of supply to Singapore, 380cst HSFO east-west spreads for the forward month have fallen steadily since early May, reaching -$0.25/t on 18 May and dropping to -$2.50/t on 19 May. This was the first time in at least two years that they have entered negative territory, according to brokers. The east-west spreads turned positive yesterday, but remained narrow at $3/t.

The weakness of HSFO bunkers contrasts sharply with the strength observed in the VLSFO market, where prompt availabilities have tightened considerably resulting in high premiums and a widening range of reported prices.

Singapore's bunker sales are about 4mn t/month, of which about 1mn is accounted for by HSFO, according to Maritime and Port Authority (MPA) data.

By Sammy Six and Sarah Giam