Singapore — A slowdown in West-to-East low sulfur fuel oil arbitrage flows in May is expected to boost sentiment in Singapore, but the downstream market in the city-state is facing headwinds from competitive North Asian bunker prices, according to fuel oil traders.
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Register NowMeanwhile, high sulfur fuel oil demand from South Asia in May looks set to decline amid lower power consumption due to the Eid al-Fitr holidays mid-month, as industries reduce plant operating rates or shut for the festival.
MARINE FUEL 0.5% SULFUR
** Discussions for the Singapore Marine Fuel 0.5%S May-June backwardation April 26 were rangebound, with bids at 50 cents/mt against offers at $1.50/mt, Intercontinental Exchange data showed. The spread was at 75 cents/mt at the Asian close on April 23.
** Arbitrage cargo arrivals in Singapore in May are estimated to be nearly 1 million mt lower compared to the April estimate of 2.5 million-2.6 million mt, according to traders surveyed by S&P Global Platts.
** Lower volumes are expected from the Americas and India, with Brazil's Petrobras selling some LSFO to the Caribbean market amid higher premiums there.
** In the North Asian bunker market, Marine Fuel 0.5%S prices are expected to remain weak as a bearish China market weighs on bunker prices in the region, market sources said.
** The delivered Zhoushan Marine Fuel 0.5%S bunker assessment, which sank below the Singapore assessment on April 12, was $7.75/mt lower on April 23, Platts data showed. Supply remains ample at China's biggest bunkering port as local refiners ramp up their production while competition is fierce, especially among large bunker suppliers to expand their market share, traders said.
** Lower Zhoushan prices have also impacted Singapore's bunker demand and are expected to weigh on sentiment in the week of April 26 as well. "Bulkers have been observing the delivered-basis spreads between Singapore and Zhoushan closely ... while container vessels have reduced their spot demand here [in Singapore] too," a trader in Singapore said.
** Despite spreads cooling off from a peak of $16/mt on April 19 to $7.75/mt on April 23, market sources said such levels have encouraged shipowners to opt for full stems at Zhoushan, keeping the pressure on VLSFO demand in Singapore.
HIGH SULFUR FUEL OIL
** According to brokers' indications and ICE data, morning discussions for the May-June Singapore high sulfur fuel oil 380 CST spread opened April 26 narrower from April 23's backwardation of 80 cents/mt, with bids at 50 cents/mt against offers at $1/mt.
** In contrast to rising imports in March and April, one of the largest buyers of HSFO, Bangladesh, is expected to import nearly 20% less cargo in May on account of lower consumption during the Eid al-Fitr festival, according to the president of the Bangladesh Independent Power Producers' Association.
** In contrast to LSFO, the Singapore-delivered HSFO premiums traded between $10.23/mt and $10.79/mt over April 19-23 -- steadily climbing from the 11-month low of $7.12/mt on April 5, Platts data showed.
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