Singapore ex-wharf 500 CST bunker fuel term contracts for the first quarter of 2018 were concluded at a discount of 50 cents/mt to $1.5/mt to Mean of Platts Singapore 380 CST high sulfur fuel oil assessments, trade sources said this week.
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This is lower than the differentials concluded for Q4 ex-wharf 500 CST contracts, which were at a discount of 25 cents/mt to a premium of 25 cents/mt to MOPS 380 CST HSFO assessments.
Demand for the high viscosity fuel for Q1 was little changed from the previous quarter, trade sources said.
"RMK [grade fuel oil] end-demand is mostly from container [vessel] owners, and I didn't hear of any major change in their voyage route," a trader said.
One possible reason for lower Q1 ex-wharf RMK term differentials could be that more fuel oil cargoes are expected to arrive in Singapore in January and February, trade sources said.
"If the spread on the curve ahead is weakening, sellers will be more aggressive on the offer," another trader said.
The Month 1/Month 2 380 CST HSFO swaps spread, which was assessed at plus $2.75/mt at the start of October, weakened over the past two months to as low as minus 25 cents/mt two weeks ago.
The spread has, however, strengthened in recent days to plus 85 cents/mt Wednesday, S&P Global Platts data showed.
The spot daily ex-wharf 500 CST bunker fuel differential has tracked the decline in cash differentials for 380 CST HSFO cargoes and ex-wharf 380 CST bunkers since October.
The cash differential for the mainstay 380 CST HSFO market fell from plus $2.48/mt on October 2 to be assessed at a premium of $1.41/mt Wednesday, while the spot 380 CST ex-wharf bunker fuel differential against MOPS 380 CST HSFO tumbled from plus $3.62/mt at the start of October to plus $1.98/mt Wednesday, Platts data showed.
The spot ex-wharf 500 CST bunker differential to MOPS 380 CST HSFO stood at minus $2.02/mt Wednesday, down from minus $0.88/mt at the start of October.
Premiums or discounts for physical bunker fuel reflect prices buyers are willing to pay relative to published benchmark values.
Cash differentials for physical fuel oil represent the price buyers are willing to pay for the oil over and above benchmark values published around the day a cargo loads.