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Hong Kong bunker market's thirst for LSMGO pushes price to over 5-month high

Hong Kong bunker market's thirst for low sulfur marine gasoil has pushed the assessed price for the product to its highest in more than five months, on the back of a persistent supply tightness that has gripped the market since early November.

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At the Asian close Thursday, LSMGO for delivery in Hong Kong surged $19.25/mt to $598.50/mt, with the day-on-day rise in price also the single biggest increase seen since S&P Global Platts started assessing LSMGO for delivery in Hong Kong on June 1, 2017.

Traders in Hong Kong said late Thursday that while LSMGO supply has been tight since last week, the upward momentum has continued and intensified into this week, fueled by a double whammy of good demand and lean supply.

"Demand is strong and cargo is tight," a Hong Kong-based trader said. "For LSMGO, there's really nothing [that I can get] so far from outside [other suppliers] as [their supplies have] also dried up," he said.



It was heard that around three Hong Kong suppliers were facing vessel arrival delays. Reasons for the delays could not be immediately confirmed Thursday. But other market sources said that the tight situation could ease by mid-November.

"One supplier is supposed to have volumes coming in on November 10, while another shipment is expected around the middle of the month," a trader said.

Still, other traders said it was heard that volumes for the earliest LSMGO shipment were not substantial, and that it was probably already committed to fulfilling term contracts.

"As far as I know, even when that cargo arrives, the market will still be tight ... as it is, I don't even have enough to fulfill term contracts," a trader said.

Another industry source said: "I'm seeing upwards of $600/mt for big quantities of LSMGO for spot inquiries, like 200-mt size stems." Delivery date details for this inquiry however, could not be confirmed.

During the Platts Market on Close assessment process Thursday, Chimbusco Pan Nation was the sole LSMGO buyer in the Hong Kong bunker fuel MOC process.

The trader started its bid for 50 mt of LSMGO for delivery in Hong Kong over November 12-13 at $578/mt and steadily improved to and stood at $598/mt at the end of the MOC process, without attracting any sell interest.

--Clarice Chiam, clarice.chiam@spglobal.com

--Edited by Irene Tang, irene.tang@spglobal.com