FUJAIRAH DATA: Feb bunker sales slump after traders shun Russia

The Port of Fujairah's bunker sales slumped in February to their lowest since reporting began in 2021 as traders balked at selling to Russian-flagged vessels and buyers tried to minimize purchases because of high prices after Russia's invasion of Ukraine.

Total sales dropped 5.2% month on month to 617,622 cu m, the lowest since at least January 2021, according to data published March 16 on the Fujairah Oil Industry Zone website. FOIZ began reporting monthly bunker sales in March 2021 exclusively to S&P Global Commodity Insights, with the data starting in January 2021.

Bunker demand dropped as local suppliers rejected purchase orders from Russian-flagged vessels, local sources said. At the same time, buyers tried to minimize purchases for future voyages as Fujairah bunker prices soared in line with crude oil.

Premiums of Fujairah-delivered marine fuel 0.5%S over the benchmark FOB Singapore marine fuel 0.5%S cargo assessments rose to average $25.98/mt in February from January's average of $18.31/mt, according to S&P Global data. The premiums strengthened to average $41.86/mt over March 1-15, the data also showed.

"Volatility has taken its toll on bunker demand, especially as the flat price is breaking new bounds almost every other day," a Fujairah-based bunker supplier said.

The Ukraine war is expected to curb supplies of low sulfur bunker fuel at Fujairah as economic sanctions on Russia impede imports of LSFO feedstocks for the blending pool, local traders said.

"Prior to the peak of the geopolitical tensions, weak arbitrage economics have already dwindled LSFO inventories at Fujairah to crimp demand," a Fujairah-based trader said. Stockpiles of heavy distillates, including LSFO, at Fujairah dropped to a three-month low on Feb. 14, according to FOIZ data.

Skyrocketing insurance premiums also pushed up freight rates in the Black Sea, where suppliers look for LSFO blending components, thus increasing costs at Fujairah, according to bunker suppliers.

Market participants said they have yet to see demand shift to other ports in response to high Fujairah prices, although some traders said they are expecting that in the next few weeks.

Singapore-delivered marine fuel 0.5%S typically trades at a premium to Fujairah, but spreads flipped into a discount on Feb. 8. The spread averaged minus $22.45/mt over March 1-15, from minus $6.56/mt in February, according to S&P Global data. The spread was minus $33/mt on March 15, the widest discount in 11 months.

HSFO bunker sales are holding up in March, traders said, after high prices curbed demand in February.

"There are plenty of HSFO cargoes and sellers are desperate to sell," a bunker supplier said. "Traders are trying to undercut competition and aggressive fixing levels have been seen since February."

Premiums of Fujairah-delivered 380 CST HSFO against the FOB Arab Gulf 180 CST HSFO cargo assessment averaged $19.31/mt in February, below the average of $22.27/mt in January, S&P Global data showed. The premiums averaged $13.55/mt over March 1-15, according to the data. Traders said they expect the pricing to support demand for the rest of March.

Singapore delivered 380 CST HSFO averaged $2.67/mt below Fujairah in February, compared with a discount of $8.71/mt in January, S&P Global data showed. The discount averaged $2.55/mt over March 1-15, the data also showed.