Asia's LSFO cash differential climbs to biggest premium in over four months

Asia's low sulfur fuel oil cash differentials have risen to their highest premium in more than four months, buoyed by an uptick in downstream demand after the year-end holiday season and expectations of stronger bunkering activity in the run-up to the Lunar New Year in February, according to traders.

Platts, part of S&P Global Energy, assessed the cash premium for the Singapore marine fuel 0.5%S cargo over the Mean of Platts Singapore marine fuel 0.5%S assessment as high as $2.79/metric ton on Jan. 16 -- the highest level since Aug. 27, 2025, when it reached $2.83/mt.

Although the differential, which has strengthened in four of the last six trading sessions, was assessed slightly lower at $2.67/mt on Jan. 19, it remained more than 400% higher than a week earlier, according to Platts data.

The LSFO market is expected to experience a rebound in Western arbitrage arrivals in January, as Singapore -- the world's largest bunkering hub -- is projected to receive about 300,000 mt more volume from West of Suez markets compared with the previous month, Platts reported Jan. 15.

Traders said this influx is expected to continue adding to existing regional stockpiles in both January and February, exerting pressure on near-term market fundamentals.

A Singapore-based trader said that the recent strength in cash premiums partly stems from some marginal tightness in the prompt availability of on-specification 0.5% sulfur marine fuel grade, as all the supply flowing into Singapore must be blended to produce the on-spec grade for the market.

The Singapore marine fuel 0.5% February-March swaps time spread was pegged at a backwardation of $1.25/mt in midmorning trading Jan. 20, in line with Platts' assessment of the spread at the Asian close Jan. 19.

The Mo1-Mo2 intermonth spread for FOB Singapore 0.5%S marine fuel swaps has averaged a contango of $1.11/mt so far in January, compared with an average of minus $1.10/mt in December, Platts data showed.

"I will not say the [LSFO] paper market is going to go back to a $3-$5/mt backwardation, like we used to see earlier ... But I think now we are seeing some people are starting to build positions for 2026," said another Singapore-based trader. "LSFO was kind of oversold, and now it is recovering a bit."

Platts assessed the Singapore front-month crack spread for the 0.5%S marine fuel grade against ICE Brent futures higher by 34 cents/b day over day at $4.53/b on Jan. 19, representing the strongest level since $4.99/b on Nov. 24.

Bunker demand

Singapore's marine fuel sales hit an all-time high in December 2025, lifting full-year sales to a record, according to Maritime and Port Authority of Singapore data Jan. 13.

Full-year 2025 marine fuel sales increased 3.4% to 56.77 million mt as the city-state recorded strong port activity alongside higher fuel offtake, according to the data.

Although LSFO remained the dominant bunkering grade by volume, its total volume fell to 28.82 million mt in 2025 from 29.58 million mt in 2024, the data showed.

"We usually see a pickup in bunker demand ahead of the Chinese New Year," said a trader. Zhoushan's offer levels typically become more aggressive closer to the Lunar New Year, although this has not been the case so far this year, as Zhoushan remains at a premium over Singapore, according to the trader.

Platts assessed the Singapore-delivered marine fuel 0.5%S bunker premium against benchmark Singapore marine fuel 0.5%S higher by 84 cents during the session at a three-week high of $15.18/mt on Jan. 19. The delivered bunker premium has gained 21.4% so far in January, reaching its highest level since $15.61/mt on Dec. 29, Platts data showed.