Fujairah's Oct ex-wharf HSFO premiums stable to lower; bunker demand steady

Term contracts for October-loading ex-wharf 380 CST high sulfur fuel oil at the Middle Eastern bunker hub of Fujairah were inked at premiums of around $7-$10/mt to Mean of Platts Arab Gulf 180 CST HSFO assessments, traders said Oct. 17, amid improving supply dynamics.

HSFO cargo availability around Fujairah has progressively improved over the past several weeks, with slower domestic consumption from utility sectors in the Middle East as the peak summer demand season gradually eases, according to traders.

As a result, most term ex-wharf 380 CST HSFO deals for October's supply were contracted at premiums in the high single digits, traders said.

In comparison, most ex-wharf HSFO term contract barrels for September-loading cargoes were signed at premiums of around $7-$13/mt, traders previously said, but the upper end of this range has since softened amid increased cargo availability.

"Demand remains steady just like it has been for the last few months since the Red Sea issue began," a Middle East-based bunker trader said.

In addition to weather events in early September that hampered barge reloads and delayed downstream deliveries, a batch of reportedly off-specification HSFO cargo also reduced product availability for prompt ex-wharf loadings, according to bunker suppliers.

Three replenishment cargoes totaling about 1.5 million barrels, or around 236,000 mt, reportedly sourced from Iran, were likely to have found buyers around the Fujairah hub in the first half of October, filling inventories, industry sources said.

Although the prevailing HSFO bunker premiums in Fujairah are significantly lower than before, traders said that largely firm demand in the downstream HSFO market helped balance overall dynamics.

The Platts-assessed Fujairah-delivered 380 CST HSFO bunker premium to FO 380 CST 3.5% FOB Arab Gulf cargoes averaged $40.53/mt over Oct. 1-16, down 19.35% from the September average of $50.26/mt, S&P Global Commodity Insight data showed.

Meanwhile, spikes in Singapore's HSFO downstream premiums since September have dampened spot buying appetite, prompting more shipowners to limit their requirements at the world's largest bunker hub and maximize their stems when calling at the UAE, resulting in significant cost savings.

Bunker price spreads between Singapore-delivered 380 CST HSFO versus the same delivered grade in Fujairah widened to an average of $28.20/mt over Oct. 10-16, rebounding from a two-year low of minus $20/mt over Sept. 6-12.

Over January-September, HSFO accounted for 31.1% of total bunker sales, amounting to around 1.59 million cu m across all grades, compared with 24.2% for all of 2023, according to data by the Fujairah Oil Industry Zone.

HSFO demand will remain strong in the future as scrubbers have become more economical and cheaper to build, with costs decreasing over time as the technology has advanced, Adrian Tolson, industry expert and founder of consulting firm 2050 Marine Energy, said in an interview with Commodity Insights.