Singapore’s low sulfur fuel oil inflows from the West are expected to be marginally higher in September despite the West-East arbitrage being technically viable in recent weeks, but delays could lead to some shipments spilling over into October arrivals, trade sources said.

The world’s largest bunkering hub of Singapore is now expected to receive around 2.6 million metric tons-2.7 MMt LSFO from the West in September, compared with around 2.5 MMt scheduled for August, trade sources said in the week started Aug. 25.

The Asian LSFO market is a bit tighter on the prompt with currently lesser arbitrage volumes coming from the West, said one Singapore-based trader, adding that “it seems it has been difficult” to move oil from Europe, especially for the earlier part of September arrivals.

“I guess the West-East arbitrage window has been borderline open, but it has not really been working … However, for October it looks more workable,” he added.

Although the Asian market has not yet seen any sizable surge in supplies from Kuwait’s Al-Zour refinery in recent weeks as was expected earlier, Singapore has been receiving increasingly higher supplies from West Africa’s Dangote refinery, trade sources said.

In its first spot tender in nearly two weeks, the Al-Zour refinery has offered a 130,000 metric tons LSFO cargo for Sept. 28-29 loading in a tender that closed Aug. 29. KPC last sold a similar-sized LSFO cargo for Sept. 12-13 loading to Chevron, which was likely heading to Fujairah, sources said.

A lukewarm uptick in Singapore bunkering activity, alongside firm import demand from China trying to save its export quotas for September, have made the short-term Singapore market tight, while most of the September arbitrage arrivals from the West are scheduled for the second half of the month, market sources said.

The spread between Singapore 0.5%S marine fuel cargo and FOB Rotterdam 0.5%S barge assessments, or the East-West spread, was at $57 per metric ton on Aug. 29, unchanged on the day, but holding at its widest since Nov. 24, 2023, when Platts last assessed it higher at $59.50/t, S&P Global Commodity Insights data showed.

“From a seasonal perspective, the Mediterranean has summer [power generation] demand that typically lasts from August to September. July-August actually is the peak, while September still has a residue of summer demand. The power generation demand is causing Europe, especially the Mediterranean, to be quite tight,” one trader said.

“So, if the Mediterranean is tight, any excess barrels from Amsterdam-Rotterdam-Antwerp would typically be consumed within the Mediterranean first before they come East,” he added.

Platts assessed the Singapore 0.5%S marine fuel cargo’s cash premium to the Mean of Platts Singapore Marine Fuel 0.5%S assessment 25 cents/t lower on the day at $12.09/t on Aug. 29, but still within close sight of a more-than-eight-month high of $12.69/t reached Aug. 23 — the highest level since Dec. 4, 2023, when it was assessed at $14.07/t, Commodity Insights data showed.

Support for European VLSFO market

Meanwhile in Europe, the very low sulfur fuel oil market has tightened into August amid lower supplies and an open arbitrage to the East.

From a demand perspective, traders said the open VLSFO arbitrage is partly providing strength to the European markets, sources said.

Toward the beginning of August, “major players” were moving cargoes through this West-East open arbitrage, one source said, while a second source said it has recently seen an international oil company “move three Aframaxes to the East.”

Bunkering demand within Europe has also been increasing into the month, however, sources noted a tighter supply side as driving the market up.

An analyst source said it was “seeing a lack of supply … refineries used to dump lots of VLSFO on the market, but this has not been happening as much recently.” It added that it was seeing the VLSFO arbitrage strong but expected this to normalize over the midterm.

Platts last assessed the Marine Fuel 0.5% FOB Rotterdam barge market at $539/t Aug. 28 while the equivalent month-one Brent crack spread was assessed at $5.40/b Aug. 28, up from $3.41/b at the beginning of the month, according to data from Commodity Insights.

Source: Platts