Hong Kong's ex-wharf LSFO term premiums rise in December on tight supply

Term contractual premiums for ex-wharf 0.5%S marine fuel cargoes at the North Asian bunkering port of Hong Kong rose in December due to supply tightness, while demand remained largely stable, local bunker traders said Dec. 10.

Term ex-wharf LSFO contracts for December parcels were concluded at premiums of around $45-$49/mt to benchmark FOB Singapore Marine Fuel 0.5%S cargo values.

This was higher than November-loading parcels, which were inked at around $35-$39/mt due to fewer inquiries and an ample supply to meet end-user requirements.

However, premiums for December-loading parcels were similar to the $45-47/mt level seen in October, as tighter LSFO supply in late November raised expectations that December term premiums would be fixed higher, while the demand outlook was anticipated to remain steady in the month.

"There were several typhoons in Hong Kong last month; [coupled with] the monsoon season occurring in North China, some of the LSFO cargoes were delayed from November, which will have a spillover effect in H1 December. However, cargo availabilities for H2 December would not be an issue," a local trade source said.

"Demand for LSFO has been quite steady, and there will be cargo replenishments [arriving at ports in Hong Kong] for LSFO tonight [Dec. 9]; supply now should be okay," a second trade source, adding that most suppliers could offer LSFO for prompt deliveries from around Dec. 13 onward, despite the earlier tightness in the market.

The Platts-assessed Hong Kong-delivered marine fuel 0.5%S bunker prices have averaged a premium of $41/mt to the same delivered grade in Singapore so far in December, compared with $20.52/mt in November, Commodity Insights data showed. The spread was most recently assessed at $36/mt at the Dec. 9 Asian close.

The Hong Kong-delivered premium over FOB Singapore Marine Fuel 0.5%S cargo values rose to an average of $54.50/mt month to date in December, up 51.10% from an average of $36.06/mt in November. The premium was most recently assessed at $50.06/mt on Dec. 9, down 33 cents/mt from Dec. 6.

On the HSFO front, term ex-wharf contracts for December parcels were concluded at premiums of around $45/mt, higher than November and October, which were inked at around $32-$40/mt, according to market participants.

"Everyone seems to be able to offer HSFO, and there is still sufficient cargo supply [to meet end-user demand], but there is not so much HSFO demand currently," another local trade source said.

Platts assessed the premium for Hong Kong-delivered 380 CST HSFO cargo over FOB Singapore cargo values at an average of $50.92/mt so far in December, up from November's average of $40.56/mt, Commodity Insights data showed.

Meanwhile, term contractual premiums for December-loading Hong Kong ex-wharf low sulfur marine gasoil contracts with a sulfur content of 0.1% to the FOB Singapore cargo value were concluded lower at $21/mt, compared with $22.35/mt in November, amid balanced supply-demand dynamics, market participants said.

"Demand has always been stable for gasoil, and there is no problem with the supply of gasoil. Any price fluctuations could be due to a few suppliers seeing tight barging schedules, but the market in general has been quite stable and balanced," a Hong Kong-based supplier said.