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Analysis: Demand shake-up needed for Singapore bunker premiums to recover


A shake-up in demand is needed for premiums to recover in the Singapore bunker market, which has seen tepid uptake and ample supply since mid-February.

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"The market has not really picked up in April, premiums are still more or less stuck in the same range [this month]," a Singapore bunker trader said this week.

Bunker premiums in Singapore have trended down in February due to a growing supply glut and lower demand, before staying largely rangebound in March and April amid slow bunker uptake.

Singapore ex-wharf 380 CST bunker premiums over Mean of Platts Singapore 380 CST high sulfur fuel oil assessments averaged around $1.70/mt in April so far, stable from the average seen in March, Platts data showed.

This has tumbled from earlier in the year, when the 380 CST ex-wharf premium averaged $7.60/mt in January and $3.50/mt in February, the data showed.

"It's been quiet for a long time ever since Chinese New Year [mid-February], this year's quarterly sales have dropped a lot from last year," another bunker trader said.

Latest updated data from the Maritime and Port Authority of Singapore showed that Singapore's bunker fuel sales in March fell 1.9% year on year to 4.09 million mt.

According to the MPA data, this year's Q1 monthly sales averaged 4.02 million mt, sliding 6% from a monthly average of 4.3 million mt for last year's Q1 sales.


Market participants attributed slower demand to various macroeconomic factors, including the US-China trade tensions and slower vessel movements following the Vale dam accident in Brazil.

"There is no clear single factor, would think it's a combination of recent trade incidents seen globally that could have had some spillover [impact] into the shipping industry," a third bunker trader said.

Others attributed some shift in tanker bunkering demand from Singapore to Fujairah, due to cheaper delivered bunker prices in Fujairah in Q1.

The Fujairah-Singapore 380 CST bunker price difference averaged minus $6/mt over Q1, lower compared with plus $1/mt over Q4 2018, Platts data showed.

This could have attracted some tankers to take bunkers at Fujairah instead of Singapore, provided there were no substantial deviation costs involved, sources said.

"Maybe some other regions including China also sort of pulled a bit of the demand away," a fourth bunker trader said.

"Main thing is that there's too much oil flowing to Singapore and there's no way to digest it promptly so we see oversupply in tankage now," the trader added.


The present supply overhang in the high sulfur fuel oil market has also added to bearish sentiment in the bunker market in recent months.

Mainstay 380 CST HSFO cash differentials have been hovering in negative territory since late March, Platts data showed. The differential slipped into a discount on March 28 for the first time in nearly a year, the data showed.

While some optimism stemmed from expectations of an easing supply glut when summer season utility demand kicks in from the Middle East, this has not materialized yet, sources said.

"Once we see millions tons [a month] of orders from the Middle East, market will turn strong, but we haven't seen it yet," a Singapore-based fuel oil trader said.

Market sources expected Middle Eastern countries such as Saudi Arabia will start buying HSFO in April or May for air-conditioning demand.

"Apart from summer demand from Middle East, there are some factors which could lead to supply tightness, such as turnaround at refineries and supply decline from Venezuela," the trader added.

Fuel oil arrivals into Singapore for May is expected to be relatively lower as compared to April, market sources said.

According to market sources, under 3 million mt of arbitrage fuel oil has been fixed to arrive in Singapore during May, down from about 4.5 million mt expected in April.

--Jeslyn Lerh,

--Atsuko Kawasaki,

-- Edited by Elizabeth Thang,