Singapore low-sulfur marine fuel arbitrage arrivals from West could decline in Oct

Singapore's low sulfur fuel oil arrivals from Western markets could decline in October, as steeper freight rates have rendered arbitrage flows uneconomical.

The world's largest bunkering hub, Singapore, is expected to receive 1.5 million-1.6 million mt of LSFO from the West in October, down from 1.6 million-1.8 million mt in September, according to estimates from Singapore-based traders.

Trade sources said the region could experience an uptick in cargo inflows in the second half of the month and into November.

"The first half of October is definitely looking tight, but we should see some Western cargoes in the second half," a traders said.

Another trader said, "The East-West LSFO [spread] is basically trying to compensate for the freight."

Platts, part of S&P Global Energy, assessed the spread between Singapore marine fuel 0.5%S cargo and FOB Rotterdam 0.5%S barge assessments, or the East-West spread, at $152/mt on Sept. 29, widening from $145/mt on Sept. 28.

The East-West spread, which has strengthened by nearly 17% since mid-September, was at its widest level since hitting a record high of $165/mt in March, according to Platts data dating back to April 2022.

Although some medium-sulfur blend components from Brazil and the Mediterranean are expected to enter Asia's LSFO blending pool in the coming weeks, prompt availability of on-specification, finished-grade marine fuel could remain tight, trade sources said.

"I think more and more early-November arrivals are getting fixed right now ... Maybe next month will be a tale of two halves," said a third trader.

A fourth trader said, "The first half of November should have more [LSFO] coming."

The Middle East conflict continues to cloud near-term supply fundamentals from the Persian Gulf, according to market sources.

Platts assessed the Singapore marine fuel 0.5%S cargo's differential over the Mean of Platts Singapore marine fuel 0.5%S assessment at a premium of $30.33/mt at the Asian close Sept. 29, up from $28.62/mt in the preceding session, buoyed by stronger buying interest for October-loading physical cargoes.

Eastbound flows

The availability of European very low sulfur fuel oil improved in September as arbitrage windows to Singapore and the Americas remained closed, market sources said.

However, traders said the eastbound arbitrage has since reopened, fueling expectations of tighter supplies in Europe.

A trader noted that several prompt cargoes had departed Northwest Europe, further reducing spot availability.

Demand was reported to be sluggish in the Amsterdam-Rotterdam-Antwerp hub, with limited bunker appetite.

In the ARA retail market, elevated flat prices led buyers to adopt a wait-and-see approach, delaying purchases unless essential.

In the paper market, VLSFO cracks remained weak across all prompt months.

Platts assessed the front-month marine fuel 0.5%S FOB Rotterdam barge swap against the equivalent Brent swap crack at minus 52 cents/b on Sept. 29, down from $6.72/b at the beginning of the month.

Traders attributed the weakness in Rotterdam VLSFO cracks to refinery economics. "Refineries are running at full speed because of the diesel/gasoil cracks ... and coming along with that is a lot of fuel," said another trader.

A third trader in Europe pointed to feedstock dynamics. "I think feedstock weakness is the main driver behind VLSFO being under pressure."

Another trader linked the weakness to lower low-sulfur straight-run values, noting that output from certain primary units running at full capacity in Europe has outpaced demand from secondary units.

Participants said improving outbound arbitrage economics signaled emerging supply pressure in the European VLSFO market toward the month-end.