Zhoushan's May term ex-wharf LSFO bunker premiums soar amid tight stockpiles

Ex-wharf 0.5% sulfur marine fuel cargoes for May term contractual supply at China's Ningbo-Zhoushan port were mostly concluded at around premiums of $20-$30/mt to the benchmark FOB Singapore 0.5% marine fuel cargo values, compared to premiums of around $15/mt concluded for April's ex-wharf supplies, traders said May 3.

The stronger ex-wharf premiums also capped demand for May-loading cargoes, while the lean stockpiles due to refinery turnarounds and limited LSFO output tightened the volumes on offer, according to Zhoushan's traders.

Smaller ex-wharf cargoes for May-loading dates also recently traded at around $30-$35/mt premiums too, though very few cargoes transacted within this range, according to Zhoushan-based traders.

Supply outlook for domestically produced LSFO in May is likely to remain largely unchanged from April, traders said, amid some expectations of easing inventories if refineries end their turnarounds around the second half of the month.

"China's gasoline demand has been quite supported, due also to the Labor Day vacation. [Domestic] refineries shifted their production [strategies] to buoy gasoline output than for LSFO," a source familiar with local refinery operations said May 3.

Chinese domestic refineries raised LSFO production in March by 5.7% on the year to a three-month high of 1.33 million mt, S&P Global previously reported quoting local information provider JLC.

"Players which previously took physical delivery of LSFO futures contracts on INE, could also offer out ex-wharf at more competitive premiums," a Zhoushan-based trader said, referring to the Shanghai International Energy Exchange.

To stem shortages for downstream delivery commitments, the Chinese state-owned oil majors also reportedly sourced LSFO from and around the world's largest bunker hub of Singapore, according to China-based fuel oil traders May 2.

"Higher ex-wharf premiums crunch buyers' margins. Only the larger players import LSFO to curb [downstream] shortages and could also sell some [cargoes] as ex-wharf too," the trader said.

LSFO demand from end-users were seen rather supported since March, which also helped buoy downstream bunker premiums too, local bunker suppliers said.

Platts Zhoushan-delivered marine fuel 0.5%S bunker premiums over the benchmark FOB Singapore Marine Fuel 0.5%S cargo values more than doubled to average $33.45/mt across April, from $14.68/mt for whole of March, S&P Global data showed.

Zhoushan's LSFO bunker premium was assessed $32.54/mt May 2, $10.19/mt lower day on day, S&P Global data showed.