Singapore July LSFO arbitrage inflow from West likely to stay below 2 mil mt: traders
28th June 2022 11:54 GMT

Singapore is expected to receive 1.5 million-2 million mt of low sulfur fuel oil from the West in July, compared with 1.6 million-1.9 million mt in June, fuel oil traders said in the week started June 27. 

"These cargoes are not finished [yet], still need to be blended," a fuel oil trader based in Singapore said.

As Singapore typically receives fuel oil cargoes with a sulfur content of over 0.5% and sells about 2.5 million mt/month of low sulfur bunker fuel with maximum 0.5% sulfur, supply is expected to remain tight in July, sources said.

Singapore fuel oil market has been strong, but the flow of cargoes into Asia has remained subdued owing to the tight European market, market sources said. With the values of middle and light distillates have been significantly higher, refiners are maximizing the output of lighter products globally, sources added.

From the perspective of European supply, refiners had chosen a sweeter crude diet over the past months to maximize the production of secondary products like gasoline. Increased production of gasoline has also exacerbated tightness for VLSFO. Feedstocks such as low sulfur straight-run fuel oil, commonly used for VLSFO blending, are now going into secondary units like fluid catalytic cracker units to produce the motor fuel.

Market participants expected the 0.5% sulfur complex to remain tight in the face of elevated product cracks in Europe as well. "Tightness for 0.5%S will stay as long as gasoline cracks stay sky high," one fuel oil trader said.

While 1.5 million-2 million mt of LSFO is expected to arrive in Singapore in July, some of the cargoes may drop in Fujairah where prices have been higher than Singapore, a fuel oil trader said

Fujairah marine fuel 0.5%S was assessed $78.02/mt higher than that of Singapore June 27. On average, Singapore marine fuel 0.5%S prices were $4.93/mt higher than Fujairah in 2021, S&P Global Commodity Insights data showed.

LSFO supply in the Middle Eastern bunkering hub of Fujairah also tightened on the back of maintenance conducted at a Uniper unit, traders said.

Platts ,
28th June 2022 11:54 GMT