Price-supportive factors at key ports failed to prop up bunker prices as crude market participants interpreted developments in the OPEC+ alliance as bearish.

The Bunkerworld 0.5% sulfur fuel oil index ended July 15 at $547/mt, down $10/mt on the day, up $4/mt on the week and $3/mt higher than 30 days previously, which showed a continued decrease in month-on-month premiums.

The BW380 pricing index, which represents value for 3.5% sulfur fuel oil, settled at $432/mt, down $9/mt on the day, up $5/mt on the week and only $1/mt higher than 30 days previously.

Bearishness in crude markets has weighed on the oil complex, despite OPEC forecasting 2021 oil demand at 96.58 million b/d, up 5.95 million b/d from 2020, in the organization's closely watched monthly oil market report released July 15.

Discord between the partners has counterbalanced optimism about demand. OPEC, Russia and several other allies are still trying to clinch a deal to collectively raise production by 400,000 b/d each month through the end of the year and possibly into 2022. A dispute between Saudi Arabia and the UAE over the latter's output target has been a major stumbling block, though there were indications this week that the two sides could be nearing an agreement.

An agreement on the UAE raising its level of production would signal cohesion but this agreement would have to be ratified by the other countries in the group and they may demand the same for themselves, analysts said.

In bunker markets, a steady widening of the spread between 0.5%S fuel oil and 3.5%S fuel oil, known as the Hi-5, has coincided with higher Asian imports of 3.5%S fuel oil, commodity data company Kpler said in a report July 17.

More exhaust scrubbers are being fitted to vessels to enable shipowners to take advantage of the improved economics of HSFO consumption, avoiding the more expensive 0.5%S fuel oil.

HSFO imports to all Asian countries, including intra-regional movements, averaged 6.1 million mt/month in 2019 but fell by 31% to 4.2 million mt/month in 2020. This year, they have risen again to an average of 6.6 million mt/month, Kpler data showed.

Looking ahead, traders at Singapore expect increasingly tight availability of 0.5%S fuel oil, following an uptick in demand and amid a firming premium for delivered 0.5%S fuel oil over 0.5%S cargoes.

In Europe, demand for bunker fuel is expected to remain slow next week. One trader said this is due to the Summer holiday season.

In the Mediterranean and Africa, bad weather is expected to create availability issues, with tightness around high sulfur expected to carry over into next week.

High sulfur IFO 380 in Panama has entered calmer waters after some days of heightened activity and price increases that took it to September 2019’s values. Pricing hikes in the high sulfur fuel in other Latin American ports, such as Guayaquil and Valparaiso, might follow suit in a lagged reaction.

The BW Indexes are weighted daily indexes made up of price assessments at 20 key bunkering ports. To obtain a representative geographical spread, the ports were selected by size with reference to their geographical importance.

The BW 0.5% Sulfur Index ports are Hong Kong, South Korea, Shanghai, Singapore, Japan, Las Palmas, Durban, Fujairah, Gibraltar, Piraeus, Rotterdam, St. Petersburg, Houston, Los Angeles, New York, Balboa and Santos.

The BW380 Index ports are Busan, Canary Islands, Colombo, Durban, Fujairah, Gibraltar, Hong Kong, Houston, Los Angeles, New York, Offshore Nigeria, Panama Canal, Piraeus, Rotterdam, Santos, Shanghai, Singapore, St. Petersburg, Suez and Tokyo.

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