Fujairah's July ex-wharf LSFO premiums stable, downstream margins pressured

Around the Middle Eastern bunker hub of Fujairah, July's term contract for ex-wharf marine fuel 0.5%S barrels was seen mostly concluded around $6-$8/mt to the benchmark FOB Singapore Marine Fuel 0.5%S cargo values, traders said July 2, with its steady valuations persistently weighing on downstream margins.

For July's supply of term contract ex-wharf marine fuel 0.5%S cargoes, some barrels were also inked at lower premiums ranging around $4-$5.25/mt, depending on quantities and loading windows.

In comparison, June-loading term ex-wharf low sulfur fuel oil contracts were previously signed around premiums of $5-$8, which was rangebound from May's supply.

Although the stable valuations signaled forward optimism among cargo suppliers, buyers with monthly ex-wharf requirements continued to face crunching margins amid the underperforming delivered premiums.

"Delivered [LSFO] levels are definitely not in line with ex-wharf levels, sometimes delivered levels at parity with ex-wharf or even lower too," a Fujairah-based bunker supplier said.

Platts, part of S&P Global Energy, assessed the Fujairah-delivered 0.5%S marine fuel bunker premium over the benchmark FOB Singapore Marine Fuel 0.5%S cargo value has averaged $4.59/mt for the whole of June, compared with $6.42/mt in May.

Fujairah's LSFO bunker premium was last assessed at $3.99/mt on July 1, up 49 cents/mt day over day.

Still, some suppliers who had previously dialed back on LSFO sales reportedly resumed operations in this segment to expand product offerings, owing also to tough competition in the high sulfur fuel oil turf.

LSFO cargo availabilities are expected to remain healthy at Fujairah, in addition to replenishment imports keeping the hub generally well supplied. A Suezmax shipment reportedly sourced from neighboring Kuwait recently found home in Fujairah around June end, according to industry sources.

Moreover, approximately two Aframaxes and one Suezmax cargo of Nile blend crude, a refinery feedstock for LSFO production, landed in Fujairah in June, compared with around just one Aframax shipment in May, industry sources added.

Meanwhile, sellers were also competing to fill their widely available barging slots for very prompt refueling dates, which were recently within four- to seven-day lead times.

Spotty demand caps premiums

Posing further demand headwinds amid macroeconomic uncertainties arising from the soon-to-expire tariff pause, heightened tensions stemming from the recent Middle Eastern geopolitical conflict fueled further volatility in international crude oil prices, as buyers fled to the sidelines for more clarity on market cues.

"Demand has been bumpy, there are too many slow [trading] days," a Fujairah-based trader said.

Traders also hoped that delivered LSFO discounts against the world's largest Singapore hub could widen to draw incremental demand and draw down stocks, but inconsistent demand flows around the city-state likewise deflated premiums.

Platts assessed Fujairah's delivered marine fuel 0.5%S bunker prices versus the same delivered grade in Singapore at discounts averaging $7/mt in June, slightly narrow from minus $7.80/mt in May.

Fujairah's LSFO sales in May, inclusive of both the 180 CST and 380 CST grades, slumped 6.1% month over month and 1.4% year over year to 417,180 cu m, latest Fujairah Oil Industry Zone data showed.

LSFO sales in May accounted for 67.4% of total delivered bunker volume, 0.8 percentage points below the year prior, despite a 1.5 percentage point uptick from April.

Heavy distillates used as fuel oils for shipping and power generation fell 13% to 8.947 million barrels in the week ended June 30, a two-week low, reversing the sharp 22% rebound in the week prior, according to the data.