SINGAPORE, January 25 2024: Shippers and trading firms are facing longer waits and higher prices for low-sulphur fuel deliveries at Singapore, the world’s top bunker hub, as refuelling demand rises due to ship diversions from Red Sea tensions, industry sources told Reuters.
Ships are topping up more at hubs such as Singapore where fuel is more competitively priced compared to farther-flung ports, after a growing number of vessels re-route around Africa to avoid potential attacks.
As a result, availability of slots for bunker barges, which supply marine fuel to ships, has tightened for the most actively traded very low sulphur fuel oil (VLSFO) grade.
The crunch is also exacerbated by some operators previously converting their low-sulphur barges to high-sulphur barges, bunkering sources said. Refueling demand for high sulphur fuel oil has recovered in recent years after more scrubber-installed vessels came online.
The wait for the earliest available slots for booking VLSFO barges has roughly doubled to about two weeks, compared to the typical average of one week, sources said.
Singapore bunker premiums for VLSFO have trended higher to more than $30 a metric ton over cargo quotes for prompt delivery dates, climbing from $25 to $30 in mid-January and about $20 in early January. The earlier the delivery, the higher the premium.
While there were still limited slots available for nearer-term dates, such deliveries can command premiums of close to $50 per ton, sources said.
“Should tensions in the Red Sea continue, tightness in Singapore’s bunker market will persist due to increased demand from longer voyage times,” said Ivan Mathews, consultancy FGE’s head of Asia refining and global fuel oil service.
The longer waiting times for available barges and higher delivered premiums could cap upside to Singapore bunker demand from December levels, said Mathews, as ships may choose to refuel at other Asian ports.
Meanwhile, the price spread of delivered bunker fuel above ex-wharf bunker fuel has also widened sharply this month, from about $10 in early January to about $20 a ton in late January, according to cargo and bunker traders.
Delivered bunker fuel is usually sold above ex-wharf bunker prices and typically includes a barging fee of at least $5 a ton, so a wider spread between delivered and ex-wharf prices is an indicator of higher barge margins.
Ship diversions have altered refueling patterns and boosted demand for bunker fuel at ports from Mauritius and South Africa to the Canary Islands, while demand at established hubs such as Singapore and Rotterdam is poised for further uptick, industry sources say.
Monthly bunker sales at Singapore breached 5 million tons in December, surpassing the usual 4 to 4.5 million tons a month, data from Singapore’s Maritime and Port Authority showed.
