In this list
Oil | Shipping

Asian HSFO markets endure IMO 2020, coronavirus challenges


Petrochemical trends H1 2022: Continued challenges amid latest wave of COVID-19

Shipping | Marine Fuels

Platts Bunkerworld

Energy | Oil | Petrochemicals | Olefins | Polymers | Crude Oil

Asian Refining and Petrochemicals Summit

Energy | Natural Gas | Petrochemicals | Metals | Steel

Iran's oil minister asks for nation's 'cooperation' after gas demand hit record high

Energy | Energy Transition | Oil

Fuel for Thought: Alaska officials hit the road to make the case for oil, gas investment

Listen: Asian HSFO markets endure IMO 2020, coronavirus challenges

Light sulfur fuel oil has been the main marine fuel of choice worldwide, but high sulfur fuel oil has held its stead in Asia. S&P Global Platts senior oil experts Surabhi Sahu and Oceana Zhou join Platts Asia Head of News Mriganka Jaipuriyar in examining the demand for HSFO particularly in Singapore, which is the world's largest bunkering port. They also discuss China's fuel demand and outlook, as well as the impact of the coronavirus pandemic on the Asian fuel oil markets.

Related content:

Topic: IMO 2020
Topic: COVID-19
Event: APPEC 2020


MRIGANKA JAIPURIYAR: Almost eight months have elapsed since the implementation of the International Maritime Organization's global low sulfur mandate. LSFO was perceived to be and has indeed become the chief marine fuel choice worldwide. But it's interesting to note that HSFO has held its stead in Asia.

However, 2020 is not just the year of the IMO sulfur limit rule, it has been plagued by many catastrophes such as the global COVID-19 pandemic. What does this mean for the bunker fuel market?

Welcome to this episode of S&P Global Platts Oil Markets podcast. My name is Mriganka Jaipuriyar and I am the Head of News Asia at Platts. Joining me today are Surabhi Sahu and Oceana Zhou, both of whom are senior editors in the Platts Asia market insight team. Today, we will take you through some interesting developments in the bunker fuel markets in Asia.

Hi Surabhi! Hi Oceana! Surabhi, my first question is to you. Could you tell us how HSFO demand is shaping up Singapore's bunker market?

SURABHI SAHU: Sure, Mriganka, and thank you for this. Demand for high-sulfur fuel oil is expected to remain strong in Singapore, the world's largest bunkering port. This comes despite a high uptake of cleaner fuels following IMO's 2020 global sulfur mandate

In July, data from the Maritime and Port Authority of Singapore showed that sales of 380 CST high-sulfur bunker fuel in Singapore surged 24.65% month on month. This is the second consecutive month of increases and the highest sales volume of 2020. HSFO accounted for about 24% of the total bunker sales in in Singapore July and around 21% of the total marine fuel sales mix in June. August HSFO bunker sales in Singapore are at similar levels or slightly higher to July, according to the sources we've spoken to. This trend is also reflected in tight barge availability.

Now, the strength in HSFO bunker fuel comes from a number of factors. Spot market activity for high-sulfur bunker fuel oil, for one, has picked up in July and August, with some shipowners not extending term contracts amid the ensuing market volatility. Ships that have completed scrubber installations have helped support demand for HSFO. Some of these scrubber fitted ships have come to the market now as yards started to open up after being shut down due to the COVID-19 pandemic.

Now looking at Platts data, it's also interesting to note that the spread between Singapore-delivered Marine Fuel 0.5%S and Singapore-delivered 380 CST fuel oil has narrowed from an average of about $298.9/mt in January to around $64.98/mt over Aug. 1-20.

MRIGANKA JAIPURIYAR: Thanks, Surabhi. But given the narrowing HSFO and VLSFO - that's the Very Low Sulfur Fuel Oil -spread, do scrubbers make sense?

SURABHI SAHU: Yes, indeed, Mriganka. So even with the narrow spread between high- and very low-sulfur bunker fuel oil in the current market, it is safe to say investments in exhaust gas cleaning systems or scrubbers are economically sound.

According to some sources we've talked to, such a spread will not last forever because oil prices will eventually recover. That will only support the case of scrubbers.

The use of scrubbers avoids the uncertainty surrounding the quality and availability of very low-sulfur fuel oils.

BIMCO, International Chamber of Shipping, INTERCARGO and INTERTANKO recently launched a survey focusing on the problematic properties of the IMO 2020-compliant fuel oil that can lead to issues. The survey indicated global challenges with fuel characteristics and limits being off-specification most frequently when it came to total sediment, aluminum plus silicon, pour point, ash, flash point, acid number and viscosity.

Now according to some of our sources, there are also some US refiners that have also bought high quantities of high sulfur straight run fuel oil for their coking units, supporting demand for this grade. So, overall HSFO demand remains quite robust in the coming months.

MRIGANKA JAIPURIYAR: Turning over to you, Oceana. Now, China used to be a massive consumer of HSFO. Can you share your thoughts on how demand in China is looking and what's the outlook like?

OCEANA ZHOU: That's right, China was a huge HSFO consumer, especially the independent refiners. They used it as a feedstock before they were allowed to import crude oil.

But China has adopted tighter sulfur control on bunkering fuel, and power plants do not burn fuel oil for power generation anymore. The country's actual demand for the fuel is now very limited. Maybe some independent refineries may still use HSFO in their coking units to produce gasoil, but they do that only when profit is good and there's a lack of crude oil import quota.

Having said that, however, we recently saw some interesting phenomenon of HSFO movement in China. In August, a cargo of 16,000 mt 380 CST HSFO loaded from China's bonded tax-free storage to go to Singapore. And in September, we expect to see another 80,000 mt fuel oil cargo to follow the same route to Singapore. This is very rare. We have not seen fuel oil cargo exports for several years already, since China used to consume the barrels by itself.

China built up its HSFO inventory when its price in Singapore was relatively low over February to May. When Singapore price got stronger, China sent out the cargoes to the regional trading hub for better profit.

This suggests that, for HSFO, China is turning its role from a key end-user to become a storage or trading base.

MRIGANKA JAIPURIYAR: Thanks, Oceana. That's very interesting. Surabhi, does the uptake of HSFO demand mean that compliance to the IMO 2020 rule might be getting compromised somewhere?

SURABHI SAHU: Mriganka, the transition to the IMO 2020 rule I would say has been fairly smooth despite initial skepticism due to the magnitude of the change required by shipowners, refiners and other industry stakeholders. Loss of reputational goodwill, a push by charterers and customers alike, and fines and penalties by the enforcement authorities has spurred compliance to a large extent.

In ports such as Singapore, for example, enforcement is indeed very strict.The MPA has and continues to initiate steps in this regard. It recently said it is launching six next-generation patrol craft to increase its frontline capabilities to not only ensure navigational safety but also enhance the protection of the marine environment in the Port of Singapore. These patrol craft possess new surveillance capabilities such as the multi-sensor marine thermal cameras, chemical gas detectors and drones.

Due to the COVID-19 globally, inspections and the work of surveyors has been affected somewhat but it is still being carried out with physical inspections giving way to doing this remotely. So that should pan out and has panned out quite smoothly.

Moreover, the incentive to non-comply is also very low as we have seen that the HSFO-VLSFO spread is quite narrow. So overall and around the globe, compliance has been quite good so far.

MRIGANKA JAIPURIYAR: Thanks, Surabhi. Now you spoke about COVID-19 and this brings me to my last question for this podcast. How is the COVID-19 situation impacting and shaping up marine fuel demand in general and, closer to home, in the Asian markets?

SURABHI SAHU: Well, it's been a tough market Mriganka. Industry estimates expect marine fuel demand to fall between 10%-25% in the major bunker hubs and smaller ports worldwide as the coronavirus pandemic pushes crude oil in a contango and destroys global oil demand.

Looking at just some of the challenges - there's a tightening availability of financing, heightened credit risks. There's also the issue of crew changes, which is not only aggravating the dire plight of seafarers but is also leading to a switch in demand from some ports to others.

The Port of Singapore for one is among the few ports allowing crew changes amid the pandemic. On June 25, the MPA said that since March 27, it had approved more than 13,000 cases of crew sign-ons and sign-offs involving some 650 companies and 1150 ships.

So overall, market sentiment is somber, and market players are pinning their hopes on the availability of vaccines.

MRIGANKA JAIPURIYAR: Thank you so much for your insights Surabhi and Oceana. It was lovely talking to you.

From September 14 to 16, Platts will be virtually hosting our 34th Asia Pacific Petroleum Conference. The conference boasts a wealth of deep and broad content while having a stellar lineup of speakers. This year's conference features six sessions, which will take you from the macroeconomic environment and the pandemic depression, price volatility, and market uncertainty, to the products markets and petrochemical markets, and even view points from the financial sector. Go to to find out more, review the agenda and do register. We look forward to hosting you this September.

Thank you so much for listening. Goodbye!