East of Suez bunker prices have recorded gains from Friday’s levels, tracking higher Brent values, and a tropical storm has halted bunker deliveries in Fujairah since Saturday.
Changes on the day to 16.00 SGT (08.00 GMT) today:
· VLSFO prices up in Zhoushan ($17/mt), and steady in Singapore and Fujairah
· LSMGO prices up in Zhoushan ($19/mt), Singapore ($13/mt) and Fujairah ($11/mt)
· HSFO380 prices up in Zhoushan ($11/mt), Fujairah ($10/mt), and Singapore ($9/mt)
Tropical storm Shaheen made landfall with winds of 120-150 km/h in Oman on Sunday. Before and after the eye of the storm hit land, it wreaked havoc in Oman, Iran and nearby UAE.
Bunkering has been limited in Fujairah and Khor Fakkan since Saturday, as suppliers and barge operators braced for the incoming storm, sources say. All bunker suppliers have been affected. Their bunkering schedules have been pushed back as they wait for permission from the port control to resume.
Fujairah’s harbour master says cargo operations at the Fujairah Oil Terminal Tanker (FOTT) will be stopped during sustained wind speeds of more than 25 knots (46 km/h). Cargo operations in the Main Quay and South Breakwater Berths (SBB) will be halted with winds of more than 35 knots (65 km/h). Wind gusts of 50 km/h are forecast until this afternoon, before calming.
HSFO380 continues to be particularly tight in Fujairah, with lead times standing at 12 days, which is among the longest across the three ports. VLSFO and LSMGO are more readily available in the bunkering hub, at six days.
LSMGO prices have seen larger in Singapore and Fujairah today, compared to VLSFO whose price has been steady since Friday in the two ports. As a result, the price spread between the two fuel grades has widened significantly.
· Singapore’s LSMGO-VLSFO spread has widened from $81/mt on 1 October, to $94/mt today
· Fujairah’s LSMGO-VLSFO spread has widened from $120/mt on 1 October, to $131/mt today
However, that was not the case for Zhoushan, where prices saw sharp increases for all three grades. Fuel availability remains good in the Chinese port, but with HSFO380 still requiring up to four days of lead time compared to a shorter 2-3 days for VLSFO and LSMGO.
Brent
Front-month ICE Brent crude has risen by $1.66/bbl on the day from last Friday, to $79.34/bbl at 16.00 SGT (08.00 GMT) today.
Global vaccination campaigns and economic recoveries have brought oil demand back faster than expected, especially in Asia. Coupled with supply disruptions in the US, the global crude inventory drawdown has accelerated.
Vitol’s head of Asia Mike Muller told a Gulf Intelligence webinar yesterday that global demand growth will continue to outpace supply increases towards the end of the year, according to S&P Global Platts.
“…the underlying fact remains as it has been for months that demand is causing a disappearance in inventories a lot faster than the 400,000 b/d that OPEC is proposing to put on the market. At the very time OPEC has it in their hands to take global inventories down to or below pre pandemic levels, the world wants more inventory,” he said.
Under the current OPEC+ output plan, the group will continue to phase 400,000 b/d of its oil cuts back into the market in monthly increments until April 2022. The phase-back will then increase to 432,000 b/d per month from May 2022.
The group is meeting virtually today. OPEC+ sources have indicated to Reuters that more supply could be added from November at the earliest.
OPEC+’s Joint Technical Committee has cautioned that tight gas markets and surging prices could trigger more utility companies in Europe to switch to oil-based replacements, especially if the winter gets cold.
Crude prices will likely be supported if OPEC+ sticks to its current output plan, and come under pressure with an output increase, ING strategists Warren Patterson and Wenyu Yao say.