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Singapore Marine Fuel 0.5% Jan/Feb spread hits fresh record high ahead of IMO 2020

The Singapore January/February spread for Marine Fuel 0.5% hit a fresh record high for the third consecutive trading day Monday, at $12/mt, as supply tightened further in the lead-up to the January 1 implementation of the International Maritime Organization’s 0.5% global sulfur cap on marine fuels, S&P Global Platts data showed.

The timespread maintained the strong momentum in mid-morning trade in Asia Tuesday, with a bid registered at $12/mt on the Intercontinental Exchange.

Demand for IMO-complaint bunker fuel oil has outstripped expectations in recent days, and the demand-supply imbalance was expected to continue into 2020, market sources said.

Singapore is expected to receive only 2 million-2.5 million mt/month of low sulfur fuel oil in early 2020, well short of the anticipated 4 million mt/month of bunker demand. This was adding strength to the current market as participants were concerned about the supply tightness continuing into next year.

The 10 ppm gasoil/Marine Fuel 0.5% spread hit a record low of minus $5.42/mt Monday, according to Platts data.

Reflecting supply tightness in the cargo market, delivered bunker premiums in Singapore have trended higher throughout December amid robust demand and tight barging schedules for prompt dates.

The delivered MF 0.5% bunker premium over the MOPS 0.5% cargo assessment jumped to an 11-week high of plus $71.60/mt Monday, Platts data showed. It was last higher at $79.02/mt on October 14.

Sources said the market was likely to remain strong going into early 2020 as most sellers were already out of barging slots for at least a week forward. Prompt deliveries could command a large premium, they said.

With demand getting stronger, activity for forward month Marine Fuel 0.5% swaps also increased. Bids, offers and trades for the intermonth structure were seen as far as out as November/December 2020 on ICE as of 4:30 pm Singapore time (0830 GMT) Monday.

The Q1 2020 structure was assessed at $10.75/mt Monday, the highest since the assessment was launched on May 2, Platts data showed.

The strength in the Marine Fuel 0.5% structure was seen as far as out as July/August 2020, with bids standing at $5/mt at 4:30 pm Singapore time on ICE, with the rest of the spreads through to November/December 2020 indicating a backwardated structure for the MFO 0.5% forward curve.
Source: Platts

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