Singapore's LSFO bunker market faces headwind amid buoyed stockpiles

Higher inflows of low sulfur fuel oil were met with lagging demand at the world's largest bunker hub of Singapore, fueling a gloomier outlook to dent valuations in both the upstream and downstream markets, traders said Feb. 27.

The Platts Singapore-delivered marine fuel 0.5%S bunker premiums over the benchmark FOB Singapore Marine Fuel 0.5%S cargo assessments tumbled to a near 16-month low of $15.16/mt Feb. 24, down $1.05/mt on the day, according to data from S&P Global Commodity Insights. This premium was last assessed lower at $13.15/mt on Nov. 10, 2021.

Sellers were mostly able to supply LSFO bunker on short notice, with no lack of offers within lead times of six to eight days away, indicating ample barge availabilities even for prompt requirements, according to market sources.

"Chartering rates [in the freight market] are sort of lackluster. Bunker purchasers will procure minimal stems when rates are weak. So, we seen fewer inquiries for bigger LSFO stems over the past couple of weeks," a Singapore-based trader said Feb. 27.

The Platts-assessed dirty Aframax rates for the Australia-north Asia routes have fallen to an over four-month low of $28.55/mt Feb. 24, down from a recent record-high of $43.49/mt on Dec. 27, data by S&P Global also showed.

Market participants polled by S&P Global mostly attributed the high availability of prompt barge slots to the tepid bunker demand, in addition to the more-than-adequate stockpiles for downstream commitments.

"Some buyers sought for prompt stems and cargo availabilities are quite healthy," a second Singapore-based trader said.

Inventory restocking activity in March is likely to outpace the relatively leaner end-user LSFO bunker demand, as suppliers are not able to draw down stockpiles quickly, sources also said.

Singapore's arbitrage inflows from the West could increase to reach around 2 million mt for March arrivals, compared with the 1.3 million-1.6 million mt seen across February, S&P Global previous reported quoting traders.

Cash differentials for Singapore marine fuel 0.5%S cargoes over Mean of Platts Singapore marine fuel 0.5%S assessments maintained an over three-month low since Feb. 22 and was last assessed at $6/mt Feb. 24, up 13 cents/mt day on day, according to data by S&P Global.

Likewise, ex-wharf premiums have fallen significantly over the same period too, as pressures are mounting from both the weaker bunker demand and upstream stock build, the first trader also added.

Offers for term contractual March ex-wharf marine fuel 0.5%S cargoes softened to premiums around low-teens late during the week ended Feb. 24, compared to previous offers around $15-$19/mt to benchmark FOB Singapore marine fuel 0.5%S cargo values, traders said.

Most of February's term ex-wharf cargoes were inked at $21-$25/mt premiums for recent loadings, traders said.