Zhoushan, Shanghai 0.5%S marine fuel differentials drop to all-time lows on rising supply
A surge in bunker fuel supply in Zhoushan and Shanghai, coupled with weak demand, has dragged the ports’ 0.5%S marine fuel differential to the FOB Singapore Marine Fuel 0.5%S cargo assessments to all-time lows since S&P Global Platts first began assessing the grade on July 1, 2019.
The differential between delivered Zhoushan 0.5%S marine fuel and Singapore Marine Fuel 0.5%S cargo flipped to a discount for the first time on April 16, when it dropped to minus $2.86/mt. The differential decreased further to minus $4.55/mt on April 19. The delivered 0.5%S Zhoushan marine fuel was assessed at $490/mt on April 19, while Singapore Marine Fuel 0.5%S cargo was assessed at $494.55/mt, Platts data showed.
The differential between delivered Shanghai 0.5%S marine fuel and Singapore Marine Fuel 0.5%S cargo assessments dropped to 45 cents/mt on April 19, an all-time low since the launch of the assessment, according to Platts data. The delivered Shanghai 0.5%S marine fuel bunker was assessed at $495/mt on April 19.
“Demand is weak. Supply is sufficient as local refiners [are] raising production,” said a bunker supplier based in Zhoushan.
Refiners are ramping up production due to strong crack spread for 0.5%S marine fuel, local bunker suppliers said.
The crack spread between May FOB Singapore 0.5%S marine fuel and Dubai crude swaps came in at $13.34/b on April 19 compared with $6.60/b for 10 ppm sulfur gasoil and $8.97/b for 92 RON gasoline, Platts data showed.
Bunker demand has been weak in Zhoushan and Shanghai, market sources said.
“The second quarter is a weak-demand season. Normally we will see more demand in third quarter and fourth quarter,” said the bunker supplier.
Fierce competition is also dragging down prices, said a fuel oil trader. “The competition in Zhoushan is intense.”
There are 16 bunker fuel suppliers in Zhoushan of which, three companies were licensed after December 2020, making competition even tougher.
Weak bunker prices
While Zhoushan is the biggest bunkering port in China, bunker prices have weakened across the country.
“Not only in Zhoushan, [ports seeing weak prices] including North China, Yangtze River, and South China,” said a second bunker supplier based in China. Demand is weak and inventories are high, the supplier added.
Bunker prices in north China are typically higher than Zhoushan, but delivered Qingdao 0.5%S marine fuel was traded at a similar level to Zhoushan on April 19, the supplier said.
China-based bunker suppliers expected the weakness to remain for a while as demand is not likely to recover soon. “I think it won’t recover soon, [the weakness will be there] at least until May,” said the second bunker supplier.
“The weakness will continue to June because demand will not recover so soon,” said the first bunker supplier.