Singapore’s Dec term ex-wharf HSFO premiums narrow amid adequate stockpiles

The Singapore ex-wharf 380 CST high sulfur fuel oil term contracts for December’s supply were mostly concluded at premiums of around $7-$13/mt against benchmark FOB Singapore 380 CST HSFO cargo values, traders said Nov. 29, amid healthy supply.

In comparison, HSFO ex-wharf barrels for November-loading were mostly signed at premiums around $8-$15/mt, with more deals contracted at $10/mt and above, according to traders.

“December’s [HSFO ex-wharf] levels fell from premiums ranging in teens for November’s cargoes… Last couple of months many players have stocks and are unwilling roll inventories, but also unable to garner adequate interest to sell off stocks,” a Singapore-based trader said, adding that the levels at which deals were signed in November were quite volatile.

More Russian HSFO barrels could find homes towards the second half of December as refinery maintenances have recently completed, industry sources said, though close to 500,000 mt of HSFO reportedly sourced from the Middle East and Venezuela could land around Singapore Straits in the first half of December.

“Overall Russian [HSFO] cargo arrivals for December may eventually turn out lesser, as their refineries were previously under maintenance and just restarted… So, unlikely that flows [towards Singapore] could be higher than November,” the trader said.

Geopolitical tensions in the Middle East and uncertainties in 2025 with regards to the US’s handling of sanctions also induced volatility to HSFO valuations, according to traders.

Platts, part of S&P Global Commodity Insights, assessed the Singapore 380 CST HSFO cargo cash differential to the Mean of Platts Singapore 380 CST HSFO assessments to average at $12.59/mt over Nov. 1-29, higher than $7.37/mt for October.

Hi-5 spread narrows, spot demand bumpy

On the back of a softening low sulfur fuel oil complex and relatively stable HSFO dynamics around Singapore hub, the spread between the two delivered grades, or known as Hi-5 spread, has narrowed progressively over past few weeks and lessened cost-savings for shipowners with scrubber-fitted vessels.

Despite narrower Hi-5 spread, market participants maintain a rather positive outlook for scrubber uptake in 2025, as return on investments are still deemed viable with some shipowners still preferring to procure the more readily available conventional fuels than alternative fuels.

“We are still steadily getting contracts [for scrubber orders] for 2025. Though there’s some worries about a narrower Hi-5 spread recently, owners are still unsure what’s the best alternative for conventional fuels,” a source from a shipbuilding company said.

The Platts-assessed Singapore-delivered marine fuel 0.5%S values against the corresponding 380 CST HSFO assessment, called the Hi-5 spread, narrowed to an over five-month low of $75/mt Nov. 28, down $3/mt down on the day. The spread was last assessed lower at $74/mt June 12, Commodity Insights data showed.

The downstream Hi-5 spread progressively crunched to average at $100.05/mt so far in November, down from the $108.77/mt in October and $146.57/mt in September, Commodity Insights data also showed.

“We see the scrubber market positively. Some owners see alternative fuels as less feasible from a financial standpoint, and potential infrastructure bottlenecks. Even if the total orders for scrubbers next year may drop slightly, it definitely won’t plunge,” the source from a shipbuilding company added.

While downstream HSFO demand around the world’s largest bunker hub were largely steady and helped cap stockpiles, flows of spot inquiries were seen rather tepid in recent weeks, which also pressured bunker premiums, according to bunker suppliers.

Although some suppliers’ barging slots were already committed towards further out dates within H1 December for term contract deliveries, some prompt slots were available, while some players are keen to clear inventories amid steep backwardation with M1/M2 spreads still considered “high”, said sources.

China’s teapot refineries’ import appetite limited

Although traders anticipated some of China’s independent refiners to have procured some straight-run HSFO cargoes for November and December arrivals, volumes may not be very substantial due to capped utilization rates and limited refining margins.

“There’s not much market expectation that Shandong’s refiners would have any large-scale HSFO buying activity as cracks are too strong and have been on uptrend, utilization rates are too low, and reduction in tax rebates further hurt margins,” a second trader said, indicating a more bearish outlook for HSFO in the near term.

On the other hand, some market participants reckoned that China’s independent refiners might have planned on procuring some HSFO cargoes ahead of President-elect Trump taking office in January 2025, casting uncertainties over the handling of sanctions against Iran, Venezuela, and Russia, which could eventually disrupt trade flows.

Platts assessed the front-month Singapore 380 CST HSFO crack against prompt-month Dubai crude at a minus $5.20/b over Nov. 1-28, above the minus $5.81/b in October, Commodity Insights data showed.
Source: Platts