Singapore LSFO discount to gasoil narrows 33% in wake of Hin Leong exit

Singapore — The discount of low sulfur fuel oil cargoes with maximum 0.5% sulfur to 10 ppm sulfur gasoil in Singapore has narrowed up to 33% since embattled oil trader Hin Leong's bunker arm Ocean Bunkering Services cancelled deliveries, trading sources said Tuesday.

Singapore's low sulfur fuel oil with maximum 0.5% sulfur was trading at discounts of $20-$30/mt to 10 ppm sulfur gasoil this week, up from discounts of $30-$40/mt two weeks ago, traders said. They attributed the narrowing discount to a stronger delivered bunker premium. 10 ppm gasoil remains the major benchmark to trade low sulfur fuel oil in Singapore.

Ocean Bunkering Services cancelled deliveries from April 18 after Hin Leong filed for bankruptcy protection on April 17, S&P Global Platts reported earlier.

"It [the narrowing discount] looks like it is because of Hin Leong's issue," a trader in Singapore said.

Singapore's delivered bunker prices have firmed due to barge supply tightness since Ocean Bunkering Services' deliveries were cancelled.

The Singapore Marine Fuel 0.5%S bunker premium to the benchmark FOB Singapore Marine Fuel 0.5%S cargo surged 292% to $28.95/mt Monday from a record low of $7.39/mt on April 9, Platts data showed.

In addition to traders looking for replacement deliveries for OBS cancellations, market participants said they were seeing an overall improvement in demand this week. Some attributed this to China relaxing its COVID-19 restrictions enabling the movement of vessels around Asia.

"We are expecting overall bunker sales to improve slightly in April because of the return in demand from China," a bunker trader in Singapore said.

A steep contango and a lower volume of arbitrage cargoes in May were also supporting the market. The Marine Fuel 0.5%S May/June spread was assessed at minus $11/mt Monday - the March average was minus $5.11/mt, Platts data showed.

With the values of later months so much higher, traders said they were reluctant to sell at present. "As the contango is so steep, there are no sellers in the market," a Singapore-based trader said.

Further supporting values, Singapore was expecting only 2 million-3 million mt of arbitrage cargo arrivals in May, down from 3 million-4 million mt in April, traders said.

Reflecting the stronger outlook, the 0.5% sulfur cash differential to the Mean of Platts Singapore strip recovered slightly Monday from its seven-month low last Friday to minus $14.89/mt, with bids from Mercuria and Petrosummit seen in the Platts Market on Close assessment process, indicating a return of demand. The uptick ended four consecutive trading days marked by a lack of buying sentiment.

"Over the last week, the [0.5%] paper market has been driven by traders trading the Singapore gasoil 10 ppm to [Singapore Marine Fuel] 0.5% spread and that was what was primarily driving the movement in the low sulfur paper market," a derivatives trader in Singapore said.