Singapore's HSFO cash premium softens, near-term supply dynamics improve

Expectations of adequate 380 CST high sulfur fuel oil supplies for prompt liftings later in October have progressively pressured upstream valuations to an over five-month low, as traders around the world’s largest bunker hub anticipate cargo arrivals to eventually replenish the tighter-than-usual stockpiles.

Platts, part of S&P Global Commodity Insights, assessed the Singapore 380 CST HSFO cargo cash differential to the Mean of Platts Singapore 380 CST HSFO assessments at a premium of $3.33 per metric ton Oct. 7, down 17 cents/t on the day. The differential averaged $4.55/t over Oct. 1-7, less than a third of the $15.58/t for all of September, Commodity Insights data showed.

The HSFO cash premium was last assessed lower at $2.25/t April 29.

“HSFO cargo availabilities in the second half [of October] should be good,” a Singapore-based trader said Oct. 8.

Late arrivals of replenishment cargoes earlier in September limited overall supplies in Singapore, which reportedly led most sellers to stock up and also resulted in quieter ex-wharf trading activity compared with previous months.

Four HSFO shipments, amounting close to 3 million barrels, or around 467,014 metric tons, reportedly of Russian origin, are expected to find homes around the Singapore Straits in the week that began Oct. 7, according to industry sources.

Industry sources also said that two other cargoes of Middle Eastern origin and another reportedly sourced from Venezuela are likely to land around the same period.

“Some HSFO cargoes are landing during first-half October in Singapore. Cash [premiums] are lower but ex-wharf cargoes are still expensive… there’s still some baseline support [for premiums] for the latter part of October to early-November window,” a second Singapore-based trader said Oct. 8.

“Premiums in the Middle East aren’t cheap either. As risks of an all-out conflict increase, it’s creating more uncertainties in the market for the longer term,” the trader added.

Geopolitical risks due to tensions between Iran and Israel may also eventually contribute to stronger sentiment amid a potential disruption of regular trade flows.

Platts assessed the Singapore 380 CST HSFO M1/M2 swaps calendar spreads narrower at $3.77/t over Oct. 1-7, compared with $7.61/t for all of September, Commodity Insights data showed.

In fact, the Singapore 380 CST M1/M2 time spread most recently hit an over-five-month low of $1.45/t, its narrowest since being assessed at $1.25/t April 17.

Previously, some traders attributed deferred fuel oil cargo arrivals to further incidents along the Red Sea, owing to escalations in geopolitical tensions, which led even more shipowners to divert vessel routes around the Cape of Good Hope.

Traders said some of these shipowners that recently changed routes have typically been those willing to bear the risk of traversing the Red Sea despite ongoing tensions.

“Earlier, the tightness in HSFO [in September] was due also to higher demand from buyers [calling at Singapore hub], because supplies were drier in China and South Korea,” the first trader said, adding that supply for very prompt downstream delivery in Singapore remained rather tight.

The Platts-assessed Singapore-delivered 380 CST HSFO bunker premium over the FOB Singapore 380 CST HSFO cargo values most recently surged to multi-year highs of $63.15/t before easing to $52.05/t Oct. 7, and was last assessed higher at $64.11/t May 11, 2022, according to Commodity Insights data.

Data by the Maritime and Port Authority of Singapore showed that owing to a mostly steady HSFO demand landscape at the Singapore hub, downstream bunker sales of this grade averaged 1.658 million metric tons per month over January-August, above the 1.305 MMt booked for the same period last year.

In early September, weaker HSFO cracks also saw a few Chinese independent refineries submitting inquiries for imports as feedstock, though no large-scale procurement was reportedly observed as utilization rates were capped then, a trader said.

Platts assessed the front-month Singapore 380 CST HSFO crack against prompt-month Dubai crude at an average of minus $8.75/b, up from minus $9.25/b across September but still below minus $7.72/b in August, Commodity Insights data showed.