MARINE FUEL 0.5% WRAP: High transportation costs limit Europe-Asia arbitrage; USAC VLSFO prices rise

Asia

The Asian low sulfur fuel oil market, which garnered some lukewarm upsides in January, is expected to stay relatively rangebound, if not gather potential downsides, in February, as ample near-term arbitrage volumes flowing into the region offset seasonally firm downstream bunkering activity.

In Singapore, the world's largest bunkering hub, refueling demand typically picks up ahead of the Lunar New Year holidays, while bunker traders said prompt supplies are currently limited in the downstream market.

Although Singapore's LSFO arbitrage arrivals from the West of Suez markets are expected to be high in February, steep freight rates were dampening the arbitrage economics of moving supplies from Europe to Asia, Singapore-based trade sources said.

Platts, part of S&P Global Energy, assessed the Singapore marine fuel 0.5%S cargo's differential to the Mean of Platts Singapore marine fuel 0.5%S assessment at a premium of $1.25/metric ton at the Asian close Jan. 30, down from $2/mt in the previous session.

The cash premium for the IMO 2020-compliant marine fuel grade, which hit a near eight-month high of $3.56/mt on Jan. 26, however, posted a weekly decline of 52.8% in the week ended Jan. 30, and was currently at its lowest since 50 cents/mt on Jan. 12, Platts data showed.

Meanwhile, the Singapore-delivered marine fuel 0.5%S bunker premium against benchmark Singapore marine fuel 0.5%S cargo assessment increased $1.41/mt day over day to $26.96/mt Jan. 30, the highest since Sept. 18, 2024, when it was assessed at $29.52/mt, Platts data showed.

The M1-M2 intermonth spread for FOB Singapore 0.5%S marine fuel swaps flipped into negative territory at minus 15 cents/mt on Jan. 30, after staying in backwardation through the rest of the second half of January. The spread has averaged a contango of 15 cents/mt in January, compared with a December average of minus $1.10/mt, Platts data showed.

Europe

The European very low sulfur fuel oil market was well supplied in January, with the conclusion of the winter refinery maintenance season seeing stable production.

Local demand remained subdued, especially in the Mediterranean, where adverse weather led to severe delays at key ports in the second half of January.

While healthy premiums for product from the US Atlantic Coast and Singapore have opened these arbitrage windows on paper, elevated freight rates have limited the movement of barrels out of the region, trapping product in Europe.

"Freight is quite strong, arbs not really attractive at the moment," a Northwest Europe trader said.

The M1-M2 inter-month spread for marine fuel 0.5%S FOB Rotterdam barge swaps averaged at a contango of $3.06/mt in January, up slightly from the December average of $3.04/mt, Platts data showed.

Americas

The US marine fuel 0.5% sulfur market climbed significantly higher in January amid dramatic shifts in supply and demand fundamentals in the region.

In the Atlantic Coast market, renewed buying interest drove prices higher during the month amid increased power generation demand.

Platts assessed USAC 0.5% marine fuel bulk value at $495.50/mt on Jan. 30, up $89.50/mt from the previous month's close and marking the benchmark's highest point since closing at $502.50/mt on Sept. 2, 2025.

The price climb followed competitive bidding activity observed during multiple sessions of the Platts Market on Close assessment process, with the most recent bid of $482/mt observed on Jan. 28.

Sources credited the elevated price environment to growing utility demand driven by lower temperatures in the Northeast, in conjunction with rising prices for the region's traditionally used power generation source, LNG.

"Power plants switching from LNG and firing up old fuel oil generators as fuel oil is cheaper per MW of generation right now," one source said.

Meanwhile, pricing for US Gulf Coast marine fuel 0.5%S has been comparatively muted, as Platts assessed bulk value at $454/mt on Jan. 30, up $61/mt from Dec. 31, 2025.

The disparity between the two markets led to the USAC versus USGC marine fuel 0.5%S spread widening to $41.75/mt on Jan. 28, its highest level since closing at $45.75/mt on April 6, 2023, according to Platts data.