The Singapore fuel oil complex has entered June with gusto, with both the 380cst HSFO (high-sulphur fuel oil) and 0.5% VLSFO (very-low-sulphur fuel oil) cracks against Dubai reaching $25.49/MT and $8.85/MT on 2 June, marking a 223.48% and 87.01% single-day jump.
In the VLSFO market, tighter supply has been supporting cracks, as Sudanese medium sweet Dar Blend and Nile Blend crude were redirected away from Singapore and Malaysia – where they are used as VLSFO blend stock – and into China instead. Around 66% of Dar and Nile Blend exports in April and 76.3% in May were sent to China, according to data from analytics firm Vortexa. In contrast, Singapore and Malaysia received only 134,200 MT of the Sudanese volumes in May, 50,300 MT below the 3-month moving average, Vortexa data showed. Strong spot buying of VLSFO cargoes in Singapore and Malaysia by trading firm Gunvor has also supported VLSFO values, lifting VLSFO cracks, market sources say.
Meanwhile, HSFO values have been elevated by constrained supplies and larger-than-expected demand from power generation, as a cut in Middle East LNG supplies shifts demand towards liquid fuels. Around 20% of global LNG supplies remain effectively stuck in the Middle East Gulf, amid damage to Qatar’s gas facilities and the closure of the Strait of Hormuz.
But May HSFO arrivals into Singapore recorded a 10-year seasonal low of 1.35 mn MT, well below the seasonal average of 3.09 mn MT, according to Vortexa. The supply tightness is largely due to Ukraine’s continued drone attacks on Russia’s oil infrastructure, resulting in a month-on-month Russian HSFO exports reduction of 1.1 mn MT in May (of which 477,660 MT was to Singapore), Vortexa data showed. Attacks on Russian oil infrastructure are expected to continue impinging on Russian supplies so long as peace talks with Ukraine remain stalled. Meanwhile, HSFO supplies from the Middle East have also fallen by 205,900 MT year-on-year, due to disruption in flows through the Strait of Hormuz, according to Vortexa.
The higher fuel oil outright prices and cracks could eventually throttle demand, resulting in a price correction. The latest bunker sales data released by Maritime and Port Authority of Singapore (MPA) for the month of April showed a 8.70% month-on-month decline. The weaker sales are likely the result of higher fuel oil that has forced vessel operators to cut down non-essential bunkering and slow sail to manage operating costs.
In the short term, the VLSFO market is more susceptible to a price correction if bunker demand in Singapore remains weak, while the prospect for the HSFO market remains bullish as geopolitical conflicts in Russia and the Middle East constrain exports at a time when more power generators are likely to switch from LNG to liquid fuels to meet summer demand.
.webp)
