Ample availability amid less-than-robust demand has led sellers of International Maritime Organization-compliant marine fuel in Singapore's spot market to make determined offers, which has depressed valuations, making term discussions for the supply of June-loading product a less attractive proposition, traders said.
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Lackluster interest among buyers to lift contractual volumes due to relatively more attractive prices in the spot market has led buyers to roll some of the volume meant to be lifted in April to May, while it looks increasingly likely that some of the May volume would be pushed into June, Singapore-based suppliers said.
"Shipowners have been increasingly buying off the spot market to take advantage of the competitive offers, so there's less interest to fix term contracts to cover demand for June," a Singapore-based trader said.
Some buyers were also holding back and had adopted a wait-and-see approach on expectations that sellers of ex-wharf Singapore 0.5%S marine fuel bunker would make increasingly competitive offers to attract buying interest, traders said.
Term contracts for the supply of ex-wharf Singapore 0.5%S marine fuel bunker for balance May-loading fell to a premium of $1-$2/mt over FOB Singapore 0.5%S marine fuel cargo assessments in May, down from a premium of $2.5-$3/mt at which buyers had inked term contracts for May-loading product in April.
As of May 25, the spot market premium for ex-wharf Singapore 0.5%S marine fuel bunker has averaged $1.29/mt in May, down from April's average of $2.7/mt, which was down from $3.25/mt in March, S&P Global Platts data showed.
Meanwhile, some of the suppliers would rather keep product in tank and roll oil than offer down further in trying to compete with spot market offers, on expectations that buyers would sooner or later still have to come in and meet at least their base requirements, said traders.
Some of the suppliers that are especially long on inventories and under pressure to increase tank ullages for inbound cargo have been offering spot ex-wharf Singapore 0.5%S marine fuel at near-parity to Singapore 0.5%S marine fuel cargo assessments, traders said.
"Those with a more balanced inventory can afford to hold off than fixing at such levels," a Singapore-based bunker supplier said.
Weighed down by weak demand amid ample availability, the cash differential for Singapore 0.5%S marine fuel cargo over Mean of Platts Singapore 0.5%S marine fuel assessments slumped to a near nine-month low of minus $3.03/mt on May 25, Platts data showed.
Reflecting a bearish market sentiment from a supply overhang, the market structure at the front of the Singapore 0.5%S marine fuel swaps curve fell to a 10-month low of minus $3.03/mt on May 18 before edging up to minus $2.75/mt on May 25.
Although the market structure "sufficiently covers the cost of carry" into June, more suppliers will be prompted to "emulate low offers on the market" if the contango looks to narrow further, another Singapore-based trader said.
Higher Q2 volumes inked
One of the reasons that there seem to be relatively thin interest to ink monthly term contracts could be the fact that shipowners have already entered into contracts for second-quarter loading product in the first quarter itself on fears of a surge in the flat price, sources said.
Even as some of the term liftings for April were rolled over to May, an overall increase in term contracts concluded for product loading in the second quarter had helped shore up overall sales of IMO-compliant marine fuel in April, said traders.
Even as traders polled by S&P Global Platts in early May had estimated a 5%-10% drop in spot low-sulfur bunker fuel sales, latest data from the Maritime and Port Authority of Singapore showed that April low-sulfur bunker sales had edged only 0.7% lower month on month to 2.81 million mt.
Wide gasoil-0.5%S marine fuel spread
Firmness in the FOB Singapore gasoil 10 ppm market and a relatively weaker FOB Singapore 0.5%S marine fuel market -- which has led to a widening of the spread between the two transportation fuels -- is likely to spur demand for the marine fuel, traders said.
As a result, some traders felt optimistic of a likely uptick in bunker demand in Singapore, where a larger share of product is traded on a 0.5%S marine fuel pricing basis, as opposed to some North Asian markets like China and South Korea, where more product is traded on a gasoil 10 ppm pricing basis.
The spread between ultra low sulfur distillate fuel and the IMO-compliant fuel widened to an 18-month high of $80.66/mt on May 18 before inching lower to be assessed at $77.99/mt on May 25, Platts data showed.
A widening spread between 0.5%S marine fuel bunker delivered in Zhoushan and Singapore is also likely to draw demand to Singapore, traders said. The premium of Zhoushan-delivered 0.5%S marine fuel bunker to that of Singapore rose to an 11-month high of $15.25/mt on May 25, Platts data showed.