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Marine biofuel premiums soften at top bunker hub Singapore -sources

Spot premiums of marine biofuel fell at world’s largest bunker hub Singapore in early 2024, several market sources said, weighed by lukewarm demand, lower biofuel feedstock costs and a stronger underlying benchmark for residual fuel oil.

The marine biofuel market has seen growth over the last two years as shippers explore lower-carbon alternatives for dirty fuel oil, but broader demand remains slow as shippers tend to buy for sporadic trials and term contracts.

The B24 blend, the current benchmark grade for marine biofuel, combines 24% used cooking oil methyl ester (UCOME) with 76% very low sulphur fuel oil (VLSFO). The cargoes typically trade at a premium to Singapore VLSFO quotes.

Spot delivered premiums of B24 traded to as low as around $140 a metric ton over Singapore VLSFO quotes in January, bunker market sources said, down from between $145 and $170 a ton towards end-2023 and above $200 a ton in Q3 2023.

The price spread has narrowed this year after conventional VLSFO bunker prices strengthened, as shipping disruptions in the Red Sea led to firmer demand for VLSFO marine fuel.

Meanwhile, Asia UCOME prices have been capped since Q4 2023 due to slow demand and ample supplies, on top of a soft European market, biofuel traders said.

Singapore marine biofuel sales breached 520,000 tons in 2023, more than tripling from 2022 but making up only 1% of total bunker volumes, port authority data showed.
Bio-blended volumes hit a fresh monthly record high last October before easing in November and December.
Sellers are banking on the European Union’s emissions trading system for the shipping industry to lift global demand for lower-carbon marine fuels from this year.

The International Maritime Organisation also approved interim guidelines last year that helped clarify how certified sustainable biofuels can be used to improve a ship’s carbon intensity indicator rating.
Source: Reuters (Reporting by Jeslyn Lerh; editing by Florence Tan and Jason Neely)

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