Singapore VLSFO held its elevated post-shock range while the month's move came from the Middle East: with the Strait of Hormuz blockaded, Fujairah imports halted and residual stocks fell 27% to multi-year lows, bidding prompt VLSFO to a record +$150/mt premium over Singapore at the close (roughly flat in April), a supply-driven squeeze that ran even as demand fell. Singapore averaged $837.81/mt (+7.6% MoM, +66.0% YoY) but faded 3.2% open-to-close, while the West decoupled and eased (Rotterdam −8.9%, Houston −11.4%) as the March risk premium unwound and the linked European Fuel Oil curve bear-steepened (M1-M6 backwardation +$102/mt to +$76/mt).
Cross-commodity, the Singapore Hi-Lo widened to +$150/mt restoring scrubber payback while the MGO premium collapsed from +$723/mt to +$365/mt as the distillate risk premium unwound. Volatility normalised to near 4% from March's 20%, confirming the signal has moved out of flat price into the regional spread. If Fujairah-Singapore holds above +$50/mt while Hormuz stays constrained, the premium is structural rather than a spike to fade.
Price Action
- Singapore VLSFO opened $830.50/mt (4 May, the 1st a holiday), closed $804.25/mt (28 May), monthly average $837.81/mt vs April's $778.81/mt (+7.6% MoM, +66.0% YoY); the open-to-close move was 3.2%, a fade not a rally.
- Monthly high $900.25/mt (18 May), low $785.75/mt (8 May); intra-month range $114.50/mt.
- Largest single-day move: $63/mt drop on 7 May (from $851.50/mt on 6 May), unwinding the early-month risk spike.
- Fujairah was the real mover: opened $899.50/mt, closed $954.25/mt (+6.1%), average $920/mt vs April's $780/mt (+17.9% MoM, +85.3% YoY); intra-month high $1,000.50/mt (6 May).
- Rotterdam fell open-to-close $766.75/mt to $698.50/mt (8.9%), closing at the monthly low; Houston fell $850/mt to $752.75/mt (11.4%), also closing at its low.
- The four hubs split: Fujairah +6.1% and Singapore roughly flat against Rotterdam 8.9% and Houston 11.4%; the dispersion is the month's signal, not the flat-price level.
Cross-Market Dynamics
Singapore Hi-Lo widened to +$150/mt restoring scrubber payback; MGO premium collapsed and the B24 green premium compressed as fossil outran biofuel.
- Singapore Hi-Lo (VLSFO minus HSFO) widened from +$103.77/mt (April avg) to +$149.06/mt (May avg), closing at +$150/mt; HSFO (IFO 380) fell to $654.25/mt at the close as Singapore HSFO availability improved (lead times narrowing to 5-10 days) while VLSFO stayed tight.
- Hi-Lo above $100/mt restores scrubber payback economics; sustained above $120/mt historically lifts retrofit inquiry, with HSFO the more chokepoint-exposed grade given the Middle East Gulf is its dominant source (Kpler).
- Singapore MGO minus VLSFO collapsed from +$723/mt (April avg) to +$365/mt (May avg), and to +$288/mt month-end (MGO $1,091.75/mt vs VLSFO $804.25/mt); MGO had spiked to $1,880/mt in early April on the conflict-driven distillate squeeze.
- The MGO compression is a risk-premium unwind, not weakening marine demand; gasoil-linked LSMGO led the complex up in the acute phase and is leading it back down as ICE gasoil volatility eases.
- Singapore B24 green premium (B24 minus FO 0.5% Singapore FOB) averaged $213.97/mt in May vs $245.51/mt in April; the compression is mechanical, with fossil VLSFO holding firm through the squeeze while biodiesel lagged, not a decarbonisation demand signal.
- Within May the premium widened from $194/mt (5 May) to $236.25/mt (28 May) as the fossil leg faded late while B24 Singapore held flat at $995/mt close.
Price Volatility
- March was the volatility peak (Singapore CV 20.06%, Fujairah 18.82%); May CV fell to 3.80-4.63% across all three hubs, back within the pre-shock Dec-Feb range, confirming the flat-price shock has passed.
- Fujairah carried the lowest May CV (3.80%) despite the largest price gain, because it rose steadily rather than gapping; the Fujairah story is a directional spread move, so a volatility-based hedge would miss it.
- Rotterdam now carries the highest CV (4.63%) on its steady open-to-close decline; with volatility normalised, the residual risk sits in the Fujairah-Singapore differential, not in single-hub flat-price swings.
Something to Watch
Fujairah-Singapore VLSFO differential as the Hormuz signal:
- Observation: +$150/mt at month-end, a record premium versus roughly flat in April.
- Why it matters: sustained widening above +$150/mt signals the stem squeeze intensifying; compression below +$50/mt signals Hormuz transit normalising and Fujairah imports resuming.
- What to monitor: weekly Fujairah-Singapore VLSFO close; Strait of Hormuz transit status; Fujairah (FOIZ) weekly fuel oil inventories.
Note: All figures, prices and market activity referenced in this report are based on the period 1-29 May.
