Both 0.5% VLSFO and 380cst HSFO soared on 14-Jul as attacks on ADNOC shuttle vessels raised Middle East disruption fears, HSFO's largest single-day move of the month (+13.5%) and VLSFO's (+10.0%) landing on the same session. VLSFO continues to outperform HSFO, averaging $669.06/MT (+2.10% MoM, +32.23% YoY) against HSFO's $496.89/MT (−4.43% MoM, +22.53% YoY), as low sulfur supply losses from Nigeria, Kuwait and the UAE compounded the disruption fear for the grade. The VLSFO crack closed at a fresh high of $35.27/bbl while HSFO's crack round-tripped from +$4.85/bbl to −$4.67/bbl, pushing the Hi-5 spread to a fresh high of $207.47/mt. Both curves moved into bull steepening, with VLSFO's M1-M12 backwardation widening to $170.83/MT against HSFO's $102.00/mt. Looking ahead, Singapore's VLSFO import from the arb-sensitive Brazilian cargoes could redirect elsewhere if other regions bid higher. Meanwhile, continued Russian refinery outages due to Ukraine's drone attacks point to tighter HSFO supply, likely translating into a higher physical differential and wider prompt time spreads.
MARKET ACTIVITY
- 380cst HSFO: 126 bids vs 169 offers (0.75:1), sell-side dominance; 22 completed trades, of which Mercuria took 18, concentrated positioning rather than broad-based coverage.
- 0.5% VLSFO: 181 bids vs 142 offers (1.27:1), mild buy-side lean, but only 6 completed trades vs HSFO's 22. Shell led sellers (5 of 6), Gunvor led buyers (3 of 6).
PRICE ACTION
380cst HSFO FOB Cargoes (USD/MT)
0.5% VLSFO FOB Cargoes (USD/MT)
CROSS-MARKET DYNAMICS
- VLSFO crack vs Dubai rose $23.80/bbl to $28.69/bbl (Jun to Jul avg), closing at a fresh high of $35.27/bbl (31-Jul) on lost low-sulfur supply from Nigeria, Kuwait and the UAE.
- HSFO crack softened to $1.57/bbl, swinging $4.85/bbl (15-Jul) to -$4.67/bbl (23-Jul); its physical differential fell by $17.08/mt to $4.98/mt, diving briefly to a $2.06/mt discount (08-Jul).
CROSS-REGIONAL DYNAMICS
- The Fujairah−Singapore 380cst spread narrowed from -$51.13/mt to -$38.78/mt (Jun to Jul avg, +$12.35/mt), closing near the tightest print at -$33.44/mt (28-Jul).
- The narrowing tracks the same Middle East disruption driver: Fujairah cargoes bid up as regional sourcing tightens, closing the basis gap rather than Singapore weakening.
CURVE STRUCTURE
0.5% VLSFO swaps (USD/MT)
380cst HSFO swaps (USD/MT)
PRICE VOLATILITY
SOMETHING TO WATCH
- Singapore's VLSFO import share from Brazil rose from 21% (554,000/MT) to 27% (622,500/MT) of total imports. This arb-sensitive cargoes could redirect elsewhere if higher bids emerged from other regions. Watch the Brazil-Singapore freight economics and East-West spread for signs of the arb shifting away.
- Ukraine's drone attacks on Russian refineries are tightening the HSFO supply from Russia to Singapore. Continued Russian refinery outage will likely translate into higher HSFO physical differential and drive up time spreads for the prompt tenures.
Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.
