Ample HSFO stockpiles cap upside potential for Singapore's bunker premiums

High inventories of high sulfur fuel oil at the world's largest bunker hub of Singapore have pressured delivered premiums, despite the steady downstream demand, according to local traders May 19.

The steady HSFO demand in Singapore was not seen translating into stronger profit margins for downstream suppliers, as bunker premiums were rather lackluster as compared to the low sulfur fuel oil segment, traders also said.

The Platts Singapore-delivered 380 CST HSFO bunker premiums over the FOB Singapore 380 CST HSFO cargo assessments slipped 11 cents/mt on day to an over three-month low of $14.98/mt May 18, and lowest since Feb. 8 when it was assessed at $14.37/mt Feb. 8, data by S&P Global Commodity Insights showed.

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Singapore's HSFO bunker premiums averaged lower at $17.69/mt May 2-18, from $19.22/mt for whole of April, the data also showed.

"Even though demand [in the delivered market] has been rather good throughout the week, fixing levels were all even done around single-digit premiums," a Singapore-based trader said May 19.

For some players, inquiries were "fewer" and markets "quieter" in the past couple of days, due to the firm international crude oil prices compared to the previous week ended May 12, traders said.

Spreads between Singapore-delivered 380 CST HSFO and the similar ex-wharf grade, or barge spread, narrowed to a nine-week low of $5/mt May 19, down $1/mt day on day, according to data by S&P Global.

"Due to the competitive delivered premiums, it has been quite tough to turn profitable," the Singapore-based trader said.

HSFO barge availabilities for prompt deliveries within a six-day lead time was also seen mostly adequate as of May 18, according to local bunker suppliers.

Steady import flows buoy inventories

The Singapore HSFO market is amply supplied at present. Lots of flows are coming into the region, a Singapore-based trader said, with more inflows of barrels from the Middle East.

Meanwhile, weaker than expected summer power generation demand from South Asian utilities was worsening the Asian supply glut, trade sources said.

Pakistan, typically a net importer of fuel oil, was turning out to be an exporter in recent months and has added to the regional supplies, thus partly weighing on the HSFO market fundamentals. The country's oil refineries are planning to export around 100,000 mt of fuel oil in May to reduce stocks at their terminals and help run units at desired capacities.

Meanwhile, Bangladesh was looking to import lesser HSFO volumes in May as it was as ramping up LNG imports from the spot market due to a recent drop in prices of the alternate fuel used for power generation. Bangladesh could stop receiving petroleum products from some suppliers as the country's primary oil importer Bangladesh Petroleum struggles to clear pending dues amid sharp currency devaluation, S&P Global reported earlier.

Owing to the upstream stock build, cash differentials for Singapore 380 CST HSFO to Mean of Platts Singapore 380 CST HSFO averaged $5.67/mt May 2-18, below the $6.96/mt across April and $7.62/mt for whole of March, according to S&P Global data.

An 892,876-barrel, or 140,610 mt, of HSFO cargo sourced from UAE's bunker hub of Fujairah, is scheduled to discharge around Singapore port on May 29, according to data by Kpler.

A shipment comprising of 494,329 mt, or 77,847 mt, of HSFO from Iran had landed around Singapore Straits on May 14-17, while another incoming 363,675 barrel, or 57,272 mt, of HSFO sourced from the same origin is bound to arrive on May 25, Kpler data also showed.

While Singapore's commercial stockpiles of heavy distillates fell for six consecutive weeks to total 19.17 million barrels during the week ended May 17, fuel oil imports of Middle Eastern origins have jumped to an 11-week high of 276,882 mt, while imports from Russia surged to 81,947 mt over the same period, compared to 18,958 mt in the previous week ended May 10, the latest Enterprise Singapore data showed.

HSFO bunker sales -- which include 180 CST, 380 CST and 500 CST grades -- decreased 4% month on month but rose 26% on the year to 1.19 million mt in April, according to latest preliminary data by the Maritime and Port Authority of Singapore.