Zhoushan-delivered LSFO bunker price falls to 4-month low amid weak demand, unfavorable weather

Weakness in the freight markets pushed the Zhoushan low sulfur fuel oil bunker delivered bunker price to a near four-month low due to poor demand and a slow pace in China's economic recovery while supply remained adequate.

Platts assessed the Zhoushan-delivered marine fuel 0.5%S bunker price down $30/mt or 5.08% on the month to $560/mt at the July 18 Asian close, the lowest since touching $550/mt on March 27, S&P Global Commodity Insights data showed.

Bunkering activities have been disrupted since the past few days due to severe weather at Zhoushan as poor weather continues to hang over the port, with thunderstorms and strong winds expected to last until July 23, according to the latest update by Zhoushan weather agency's official WeChat channel.

This was exacerbated by typhoon "Talim" which landed for the first time on the coast of the southern three islands of Zhanjiang, Guangdong July 17, with tropical cyclone activities in the northwestern Pacific Ocean still relatively active and is expected to affect southern part of China, according to Zhejiang Weather Network and Central Meteorological Observatory.

"Zhoushan's outer anchorage remains closed due to bad weather," a China-based trader said.

A China-based supplier emphasized that Zhoushan's inner anchorage remains open, and its earliest delivery date remains around July 21.

This comes after sales of bonded bunker fuel oil at the key North Asian bunker hub of Zhoushan rose 53.8% on the year to 618,200 mt in June, S&P Global reported earlier.

Furthermore, rising crude oil prices further dampened buying interest in the near-term as the September ICE Brent crude contract rose $2.95/b or 3.9% on the month to $78.6/b at the July 18 Asian close. The contract was trading at around $79.41/b as of 12:53 pm Singapore time July 19 (0453 GMT).

The weakness in the Zhoushan-delivered 0.5%S market outpaced that of Singapore-delivered market have crunched the Zhoushan-Singapore delivered 0.5S bunker spread to $1/mt at the July 18 Asian close, down $4/mt or 80% on the week, S&P Global data showed.

Even as the softening Zhoushan bunker prices gradually narrowed the price gap versus the same delivered grade in Singapore since the second half of June, weak sentiment at the world's largest bunker hub also capped premiums owing to tepid end-user requirements and ample cargo availabilities, according to Singapore-based traders.

In a bid to expand market share and grow Zhoushan port as North Asia's bunker hub, suppliers typically attempt to offer more aggressively against bunker prices at port of Singapore, traders said.

However, amid limited LSFO bunker demand, barge schedules for prompt deliveries around Singapore were also reportedly seen healthy in recent days, while players were keen to offer out more competitively to fill up early refueling slots, according to local bunker suppliers.

Platts assessed the Singapore-delivered marine fuel 0.5%S bunker premiums over the benchmark FOB Singapore Marine Fuel 0.5%S cargo values at an average of $15.76/mt July 3-18, down from the $20.13/mt for whole of June, data by S&P Global showed.

Platts is part of S&P Global.