Singapore—While bunker demand in the Singapore Marine fuel 0.5% market continued to be lacklustre, the market has been buoyed by demand from utility companies in North Asia amid low fuel inventory and high LNG prices, traders said.
In contrast, Asian high sulfur fuel oil bunker demand has been stable, with bunker suppliers expecting the trend to continue as more scrubber-fitted vessels exit shipyards.MARINE FUEL 0.5% SULFUR** The Singapore Marine Fuel 0.5%S February/March backwardation Jan. 18 was stable at $2.80/mt from the Jan. 15 assessment, with bids seen at $2.25/mt against no offers, Intercontinental Exchange and brokers' data showed.
** On the end-user low sulfur marine fuels market, even as spot market trading activity has remained more or less muted so far this year, traders are hopeful that demand will recover from prevailing levels going further into the second half of January.
** A slight dip in flat price -- which had rallied in January thus far on the back of a firming upstream -- in the last couple of trading days had raised buying interest, especially from shipowners that had drifted to the sidelines in anticipation that flat price may drop as global crude markers correct lower.
** Meanwhile, an uptick in demand for low sulfur fuel oil cargo, especially from the North Asian markets for use as a burning fuel in the utility sector to meet peak winter heating demand, was expected to pull molecules away from the downstream marine fuels market.
** In North Asia, Japan's fuel oil demand from power utilities is increasing amid a cold snap. This also came with a delay of LNG cargo arrivals, industry sources said.
** Japan's Chugoku Electric, for example, has moved to import fuel oil in addition to its domestic procurement amid a sharp decline in its fuel oil and LNG stocks amid strong power demand, a company official said.
** South Korean Marine Fuel 0.5%S is expected to stay strong amid tight supply. Local refiners are running their crude distillation units at reduced rates, while bunker demand has been firm, market sources said.
** The spread between South Korean Marine Fuel 0.5%S delivered bunker and Singapore 10 ppm sulfur gasoil rose to $40.3/mt on Jan. 14, the highest since Apr. 24, before it edged down to $38.69/mt on Jan. 15.
HIGH SULFUR FUEL OIL** According to brokers' indications and ICE data, morning discussions for the Singapore high sulfur fuel oil viscosity spread for February opened Jan. 18 at $3.50/mt, narrower than the Jan. 15 assessment of $4/mt.
** Power demand in the Middle East and South Asia continued to support HSFO demand, with Kuwait Petroleum Corp. purchasing its third 4% sulfur fuel oil cargo for delivery over late-January from Aramco Trading, to meet domestic demand normally met by fuel oil produced at the Mina Abdullah refinery, which is currently undergoing upgrade work.
** The February/March contango in the Singapore 380 CST HSFO swaps market meanwhile continued to widen, last assessed at minus $1.10/mt Jan. 15, as traders pointed to the easing supply situation at the end of the third quarter with more Middle Eastern volumes due to arrive in Singapore then.
** However, with bunker demand expected to stay strong, traders see the current contango as short-lived, "and is not expected to last beyond the end of January", as more new scrubber-fitted vessels exit shipyards.
