The North Asian bunker markets, especially Hong Kong and Shanghai, have been reeling, most notably in the second half of July, as suppliers run dry of products for the spot market at these locations after steady demand earlier in the month.
Market sources estimate fuel oil arrival into Singapore from Europe and the US to total only about 2.5-3 million mt in July, down from an average of around 4 million mt/month seen earlier this year.
A relatively thin availability of fuel oil in Singapore for July led bunker premiums at the world's largest bunker hub to surge.
Singapore ex-wharf premium for the mainstay 380 CST bunker to the Mean of Platts Singapore 380 CST high sulfur fuel oil surged from $4.81/mt at the end of June to a near 11-year high of $27.44/mt on July 15, S&P Global Platts data showed. The differential was last assessed higher at $28.42/mt on September 22, 2008, data showed.
Singapore-delivered 380 CST bunker premium also ballooned, from $10.81/mt to a 16-year high of $34.44/mt over the same period. The spread was last higher at $36.25/mt on March 18, 2003.
A major beneficiary of this meteoric rise in Singapore bunker prices, at least in the first half of July, were the main bunkering locations in the neighborhood -- Hong Kong and Shanghai. Suppliers there scrambled to capitalize on the opportunity, which led to overcommitment and stocks running out sooner than most sellers would have liked.
"For the last few months, demand has not been good and nobody dares to take more cargo ... however, Singapore prices have been very high this month, so some demand has shifted over [here]," a Hong Kong-based bunker trader said late last week.
"[Sellers] did not import enough cargoes to cover this additional demand. It's going to be very tight until month-end," the trader added.
"We have not been able to absorb this additional demand," a second Hong Kong-based bunker said last week. "For some of our own vessels we have to delay [bunkering] ... if the vessel comes tomorrow morning, we have no [other] choice," he added.
A tight availability in Hong Kong was further exacerbated after one of China's oil majors was said to have cut nominated ex-wharf volumes to its suppliers for July by a third, said Hong Kong-based suppliers.
"We were supposed to load 50,000 mt of fuel oil this month, but got sold only 35,000 mt," said the second trader.
"Everyone is over-committed ... basically we don't have enough cargo to meet our commitments," a third Hong Kong-based bunker trader said Wednesday.
"May be they are over-committed too, or perhaps want to keep the product to sell themselves in this high premium market, but they did cut supplies by a third for all their lifters," he added about the Chinese oil major slashing July nominated volumes.
"Zhoushan and Shanghai [delivered] market was above $500/mt yesterday ... there are limited avails, and premiums [are] sky high," said a shipowner late Wednesday about high flat price offers at Zhoushan and Shanghai.
A RIPPLE EFFECT
A surge in incremental demand, which then led to a depletion of stocks, also resulted in bunker premiums in both Hong Kong and Shanghai to swell.
A lack of availability amid steady demand led Hong Kong-delivered 380 CST bunker premium to MOPS 380 CST HSFO to rise to a record high of $118/mt Tuesday.
Shanghai-delivered 380 CST bunker premium rose to $87.58/mt Wednesday, the highest since the launch of the assessment on November 2, 2009, Platts data showed.
"Most suppliers don't have enough cargo, so [can] sell high," a Shanghai-based bunker trader said last week.
Sky-high bunker premiums in Singapore have also led to demand shifting further afield to the Middle Eastern port of Fujairah, said traders.
"Lower prices than other major ports like Singapore have brought some owners back this month," a Dubai-based bunker supplier said last week.
"Demand has been more due to high bunker premiums in Singapore and tightness there, but the war risk premiums are still taking a hit on things here," another Middle East-based bunker supplier said.
Fujairah-delivered 380 CST bunker premium to Mean of Platts Arab Gulf 380 CST HSFO rose to a 6-month high of $16.84/mt Tuesday before inching lower to $15.97/mt Wednesday, data showed.
CORRECTION IMPENDING?
Multi-year high premiums amid a lack of supply at neighboring north Asian ports have led traders to put oil on water to ship to these locations, said traders.
"Two shipments from Singapore are on its way ... that product should be ready for delivery from August 3 ... then there's another cargo that should discharge by the end of the month," said the third bunker trader.
"We expect this market situation to continue till the end of the month," he said.
"Suppliers at Shanghai don't know when the new cargo will come, heard in the end of this month, but may delay ... Shanghai is out of fuel oil till the end of July," said a Shanghai-based bunker trader. - Source: Platts-