Singapore Vey Low Sulphur Fuel Oil (VLSFO) 0.5% crack against Dubai has seen a dramatic reversal, falling from $20.59/bl on 2 April to $4.52/bbl as of 16 April. The speed of the decline - over $16.07/bbl in eleven sessions - suggests a convergence of incremental supply and softening demand.
The crack had surged at the end of March, driven by supply concerns over the loss of key low-sulphur fuel oil supplies from Kuwait’s state-owned KPC, compounded by run cuts across Asian refineries amid fears of crude oil shortages as the U.S.-Israeli attack on Iran severely disrupted vessel transit through the Strait of Hormuz.
The emergence of spot tenders have been a key factor in boosting short-term supplies and pressuring the crack spread lower. Tawain’s state-controlled CPC, which shut its 200,000 b/d No.2 RFCC unit in the week ending 5th April, tendered to sell 38,000 mt of 20cst 0.35%S LSFO for 16–20 April loading from Kaohsiung. Nigerian refiner Dangote followed with a tender to sell 90,000 mt of residual fuel oil and 40,000 mt of slurry for 17–19 April loading, in addition to its previous tender offering up to 90,000mt of residual fuel oil loaded on 1 April from Lekki, adding to incremental supplies East of Suez.
Dangote had not exported any fuel oil throughout March, as the refiner prioritised supplies to the domestic market.
This uptick in supply has also coincided with ebbing demand. Vessel arrivals into Singapore points to weaker physical throughput relative to March, data from analytics firm Vortexa showed. As of 15 April, 317 vessels arrived in the first two weeks of the month against an estimated full-month total of 521 - likely to lag volumes in March, which saw 356 first-half arrivals against a full-month total of 717. The diminished flows are expected to have been driven by high outright bunker prices, incentivizing vessel owners to buy minimum requirements, limiting spot demand.
The forward curve corroborates the broader supply normalisation outlook. Between 1 and 15 April, the VLSFO 0.5% Singapore FOB swap prompt month fell over $118/mt to $675.75/mt, while Month 0–Month 8 backwardation narrowed by nearly $120.00/mt. The flattening is concentrated in the prompt months, with deferred tenors from Month5 onwards firming over the past two weeks, amid hopes that the ongoing US-Iran negotiations could pave the way for a normalisation of Strait of Hormuz transit and the resumption of KPC low-sulphur exports. An improvement in transit logistics through the strait would also spur bunkering demand along one of the world's busiest shipping lanes, providing further support for medium term prices.
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