Marine Fuel Oil 380 CST June sales rises 8.68% on month to 744,700 mt
Strong seasonal demand for 380 CST HSFO cargoes from the Middle East
Singapore — Even as sales of delivered low sulfur bunker fuel in Singapore declined on the month in June, sales of high sulfur bunker fuel climbed to its highest level year-to-date, with demand supported at these levels in the second-half as more scrubber installations are completed and limited supply.
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Register NowIn June, sales of Marine Fuel Oil 380 CST rose 8.68% on the month to 744,700 mt, preliminary estimates from the Maritime and Port Authority of Singapore released July 13 showed. This was the highest monthly sales recorded so far in 2020, with the grade contributing 19.4% to Singapore's total bunker fuel sales of 3.83 million mt in June.
Comparatively, low sulfur bunker fuel sales inched 0.11% lower on the month to 2.711 million mt in June, its third consecutive monthly decline since the coronavirus outbreak, the MPA data showed. Market participants expect demand to remain weak going forward in light of the bearish macroeconomic outlook.
"Demand for LSFO is unlikely to be at the same levels as in the first quarter of this year because that demand was propped up by IMO 2020. I expect demand to continue to weaken with the ongoing COVID-19 pandemic," a Singapore-based trader said.
On the other hand, demand for high sulfur bunker fuel has been largely stable since the transition to low sulfur fuels under the new IMO 2020 regulations, which kicked in on Jan. 1, S&P Global Platts reported earlier.
During the transition to IMO 2020, many suppliers had switched to supplying only low sulfur bunker fuel, with just a handful of high sulfur bunker fuel suppliers left in the market, Platts reported earlier.
Completion of scrubber installations to support demand
Consequently, demand for the high sulfur bunker grade increased in June as some ships had completed the installation of scrubbers onboard.
"There were some vessels that completed their scrubber installations, so shipowners were buying HSFO. There are just a few HSFO suppliers now, so supply is going to be tight in the near term," a second bunker trader said.
Market participants expect demand for the grade to continue to increase gradually in the second half of the year as more vessels complete scrubber installations. Scrubbers, designed to remove sulfur oxides from the ship's engine and boiler exhaust gases, allow ships to use heavy fuel oil since the emissions will be reduced to the required fuel oil sulfur limit.
"There are some smaller shipping companies that have cancelled their scrubber installations due to cost-cutting measures [in light of] the pandemic, but the larger companies are still on track with their installations, so demand for HSFO should be there," a shipowner said.
"I wouldn't be surprised if HSFO [makes up] 25% of total bunker sales in Singapore by the end of the year with completing scrubber installations," the second trader added.
Meanwhile, supply of Singapore delivered 380 CST bunker fuel is expected to remain tight in the near term with a few suppliers indicating on July 14 that their earliest availability is from July 22. This, and the strong seasonal demand for 380 CST HSFO cargoes, is likely to leave the region short of HSFO.
"There's a lot of demand for 380 CST HSFO in Singapore from the Middle East, particularly Saudi Arabia; peak summer demand there usually hits about 3 million-3.5 million mt/month, and local production only accounts for about 1 million-1.5 million mt/month, so they have to import the rest," a third trader said.
Reflecting the market strength, Platts had assessed the FOB Singapore 380 CST HSFO cash differential to the Mean of Platts Singapore 380 CST HSFO assessments at $2.21/mt on July 14. The differential was first assessed at a premium to the MOPS 380 CST HSFO assessments on July 7, having been in the negative since March 23, Platts data showed.
Meanwhile, as of July 14, 640,000 mt of 380 CST HSFO cargoes had changed hands during the Platts Market on Close assessment process, with western traders Trafigura, the primary buyer, and Glencore, the main seller. This compares with 220,000 mt of the grade which had traded during the Platts MOC over the whole of June.
The FOB Singapore 380 CST HSFO was assessed at $244.66/mt on July 14, while Singapore-delivered 380 CST bunker fuel was assessed at $260.75/mt, Platts data showed.
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Singapore's high sulfur bunker fuel demand supported in H2 after record June sales - S&P Global
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