Singapore Dec ex-wharf HSFO term premiums steady from Nov; upside potential limited

Term contractual supply of Singapore ex-wharf 380 CST high sulfur fuel oil cargoes for December were done at premiums of around $7-$12/mt to benchmark FOB Singapore marine fuel 0.5%S cargo values, compared with $8-$10/mt premiums concluded for November-loading term ex-wharf parcels, traders said Dec. 7.

Meanwhile, ex-wharf 380 CST HSFO term cargoes available for loading from offshore terminals at floating storages around the Singapore Straits were concluded around premiums of $7-$9/mt.

The term ex-wharf premiums for December-loading dates were steady from levels done for November's supply, as downstream bunker demand was relatively robust during the second half of the previous month until recently, when the flow of inquiries started to gradually wane, market sources said.

As a result, December's term ex-wharf parcels available for very prompt loading dates were also previously done close to $15/mt premiums.

"HSFO bunker demand since December has been slower [than in November]," a Singapore-based bunker supplier said Dec. 7.

The progressive slowing of HSFO bunker demand in Singapore also freed up barge availability for prompt deliveries, with no lack of offers for lead times within seven to ten days ahead, according to local bunker suppliers.

Platts assessed Singapore-delivered 380 CST HSFO bunker premiums over benchmark FOB Singapore 380 CST cargo values lower at an average of $22.21/mt over Dec. 1-7 from $22.49/mt during H2 November, S&P Global Commodity Insights data showed.

Also, suppliers with more HSFO stockpiles than others were seen offering earlier bunker deliveries within an even shorter lead time of around two days, according to sources from shipping companies.

The cash differential for Singapore 380 CST HSFO cargo to Mean of Platts Singapore 380 CST HSFO assessments inched lower to average $3.64/mt Dec. 1-7, from $6.57/mt for whole of November, S&P Global data showed.

Ample inventory caps upside potential

As inflows of Russian-origin cargoes are expected to remain steady, the recent strength in Asia's HSFO refining margins is unlikely to sustain in the longer term, especially amid lukewarm demand in Singapore's bunker market since December, local traders said.

Asia's front month HSFO refining margins against prompt Brent crude swaps climbed to their strongest level in more than three months on Dec. 7 at minus $25.32/mt, averaging higher at minus $29.47/mt Dec. 1-7 compared with minus $29.90/mt in November, S&P Global data showed.

The HSFO crack spread was last assessed higher on Aug. 26 at minus $24.76/mt.

"Overall the market is not really tight as of now... The premiums have come crashing down on the delivered and the ex-wharf side," a Singapore-based trader said, adding that the market would likely stay bearish at least through the end of 2022.

A brief tightness for front month HSFO cargoes was seen earlier in November as Chinese importers reportedly purchased substantial volumes from the port of Singapore, according to a Singapore-based trader.

"There are tons of Russian HSFO barrels still coming into Singapore," the trader said, adding that any strength in the HSFO market could be short lived as Russian fuel oil was cheaper than other-origin barrels; as "people are getting a bit more relaxed with the Russian cargoes."

Singapore exported about 33,000 mt of HSFO to China in November, after exporting 21,000 mt in October, compared with nil between May and September, Kpler shipping data showed.

"Whoever are having all the Russian barrels, they tend to be outside of Singapore, in the floaters [floating storage]," the Singapore-based trader said.

"So we will see the people from outside offering these, but people who don't touch this oil, will need oil. We can see bids from people who don't touch these Russian barrels. But in essence, stocks should be building through the winter, well into next year," he added.

According to another trader, power generation demand from South Asian utilities have been "disappointing in terms of the volumes, they are pulling".

Russian barrels continue to flow to East of Suez markets, exacerbating the stock build, whereas HSFO demand from the utility sector is bound to remain tepid in the meantime, market sources said.