Singapore's LSFO arbitrage arrivals from West look to rebound in Jan from Dec

Singapore's low sulfur fuel oil arbitrage arrivals from the West are expected to rebound in January after a drop in December, helped by steady flows of low sulfur blending components, according to trade sources.

The world's largest bunkering hub is expected to receive about 2.9 million-3 million metric tons LSFO from the West in January, increasing from about 2.6 million-2.7 million mt in December, at least five Singapore-based traders told Platts, part of S&P Global Energy.

In terms of Western supply flowing into Singapore, both January and February are expected to witness stock builds amid lackluster downstream bunker fuel demand, while the recent contango market structure has helped roll over inventories, several traders said.

Although not much of the Western supply is the on-specification 0.5% sulfur grade, the very low sulfur blending components from the Middle East and West Africa, coupled with the medium-sulfur materials from Europe, have been persistently adding to Asia's LSFO pool, according to the traders.

There are about three-four ships from Nigeria's Dangote refinery carrying low-sulfur straight-run fuel oil still flowing into Singapore every month, and although several loadings have been delayed, Kuwait's Al-Zour LSFO supplies are coming back, said one Singapore-based trader.

"Most of the arbitrage [volumes] that have been fixed from the Europe side were scheduled to be arriving end-January. So, some of these could end up arriving in February," he added.

The Rotterdam-Singapore arbitrage economics have been partly impacted by high freight rates, but recent fixtures suggest some volumes of both on-specification grade and blendstocks will continue to flow in over the next few weeks.

Platts assessed the spread between Singapore 0.5%S marine fuel cargo and FOB Rotterdam 0.5%S barge assessments, or the East-West spread, at $35.75/mt Jan. 14, unchanged day over day. The spread, however, has widened about 17.2% week over week, Platts data showed.

"We see a lot of cargoes incoming [in the near term]," said another Singapore-based trader, adding that plentiful availability in the region would weigh on cash differentials for the marine fuel grade, while another trader said, "February also should see high arbitrage arrivals [from the West]."

Platts assessed the Singapore 0.5%S marine fuel cargo's differential to the Mean of Platts Singapore Marine Fuel 0.5%S assessment $1.24/mt higher day over day at a premium of $2.60/mt at the Jan. 14 Asian close, buoyed by firmer bids and active interest for early-February loading cargoes.

The cash differential, which has now climbed for a third straight session, was at its highest since Aug. 27, 2025, when it was assessed at $2.83/mt, Platts data showed.

Contango market to boost arbitrage flows

The arbitrage from Europe to Singapore is closed for finished grade VLSFO material but remains active for mid-sulfur barrels, trade sources in Europe said.

Elevated freight rates and expensive distillate products have made it less economical to produce finished grade VLSFO and send it East so far in January.

Within the LSFO and mid-sulfur fuel oil markets, however, participants said several Mediterranean cargoes were active on the arbitrage East as an alternative outlet to seasonally lower utility demand.

A Mediterranean-based trader source said it saw "Four cargoes [1% sulfur and components] moving East on a Suezmax," in January.

On the production side, Northwest European markets have been well supplied, with local trader sources citing healthy VLSFO and LSFO balances in storage tanks.

The contango market structure and elevated volumes in storage have meant that the VLSFO arbitrage window is expected to become more viable in late January and early February, added another trader source.