The Singapore low sulfur fuel oil spot ex-wharf premiums would remain pressured in the near term, weighed by persistently thin demand for late-July and early-August loading cargoes amid expectations of increasing supplies at the world’s largest bunker hub of Singapore, traders said.

The Asia LSFO cash differentials dropped for the 10th consecutive session July 12 to their lowest level in more than three months.

Platts assessed the cash differential for Singapore marine fuel 0.5%S cargoes at the Mean of Platts Singapore Marine Fuel 0.5%S assessments plus $1.16/mt at the Asian close July 12 amid low outright price offers from Glencore during the Platts Market on Close assessment process from S&P Global Commodity Insights.

The marine fuel cash premium, which has slumped nearly 81% in this week alone, was currently at its lowest since April 6 when Platts assessed it at MOPS Marine Fuel 0.5%S assessments plus 42 cents/mt, S&P Global data showed. The differential has averaged $7.05/mt so far in July, compared with an average of $11.60/mt in June, the data showed.

The LSFO market is weak as increased supplies are flowing into the Straits in coming days, a Singapore-based trader said.

“It’s very unlikely that the LSFO cash differentials will turn negative in the near term. Yes, they have been going weak, but I don’t think they’ll go into discounts,” he noted, adding that the marine fuel cash premium going down to as low as around plus $1/mt is likely not a proper reflection of the overall market fundamentals and should be slightly higher.

Bearish downstream as stocks build

The downstream bunker demand for LSFO is pretty sluggish while higher Western arbitrage arrivals expected over the next few weeks would help boost regional inventory levels and further weigh on fundamentals, trade sources said.

“But I don’t really see that much increment on the regional barrels [in the short term] … Meanwhile, the gasoline cracks have been falling recently, so there’s a concern that there might be a switch on refiners’ side, where they start to produce more LSFO,” another trader said.

Buyers were also reluctant to procure incremental ex-wharf LSFO cargoes owing to leaner downstream bunker demand in recent weeks, leading suppliers to offer out July’s supply of ex-wharf cargoes more competitively than before, bunker suppliers said.

“We purchased fewer LSFO ex-wharf cargoes in July compared to June, as recent demand has been weak and overall market lackluster for the past couple of months,” a Singapore-based bunker supplier said July 13,

The spot Singapore ex-wharf marine fuel 0.5%S bunker premiums over the benchmark FOB Singapore Marine Fuel 0.5%S cargo values slipped to a near three-month-low of $9.38/mt July 12, down 48 cents/mt day on day, according to data by S&P Global.

Although downstream suppliers were struggling to keep offers elevated amid thinning margins from LSFO deliveries, pressures on bunker premiums mount as shipowners were also seen submitting aggressive bids, local bunker suppliers said.

The Platts-assessed Singapore-delivered marine fuel 0.5%S bunker premium over the FOB Singapore Marine Fuel 0.5%S cargo assessments softened to average $17.32/mt July 3-12 from $20.14/mt across all of June, according to S&P Global data.

As downstream margins fell, spreads between Singapore’s delivered marine fuel 0.5%S bunker versus the ex-wharf grade, also known as the barge spread, narrowed to average $4.13/mt July 3-12 from $5.95/mt in June, S&P Global data also showed.

Two shipments totaling 506,343 barrels, or 79,735 mt, of LSFO hailing from Indonesia’s Lalang and Balikpapan are bound to discharge around Singapore port July 14 and July 25, respectively, according to latest shipping data by Kpler.

Another 859,805-barrel, or 135,402 mt, LSFO cargo sourced from Kuwait’s Al-Zour refinery is scheduled to land at Singapore port July 21, following a previous shipment of 849,999 barrels, or 133,858 mt, that arrived recently July 5, Kpler shipping data showed.

Source: Platts