Fujairah's HSFO August HSFO ex-wharf premiums slip; stocks adequate

Term contractual ex-wharf 380 CST high sulfur fuel oil at the UAE's bunker hub of Fujairah for August were inked at premiums of around $6-$8/mt to Mean of Platts Arab Gulf 180 CST HSFO assessments, traders said Aug. 6, as some sellers were keen to draw down stockpiles.

Some of the August-loading term contract HSFO ex-wharf cargoes were also concluded at premiums around the low-teens, according to traders, while intense competition among suppliers around the UAE's bunker hub of Fujairah also pressured downstream valuations.

Previously, most of the HSFO ex-wharf term contract barrels for July were signed at higher premiums of around $8-$15/mt premiums, traders said.

"HSFO [cargo] availabilities are okay. There can be wide range of premiums seen often due to various origins and strategies that suppliers employ to procure cargoes," a Fujairah-based trader said.

The Platts-assessed Fujairah-delivered 380 CST HSFO bunker premium to FO 380 CST 3.5% FOB Arab Gulf cargoes declined to an average of $23.92/mt in July and has inched up to $25.37/mt so far in August, but still far below the $31.79/mt average in June.

"More players are getting into the HSFO space," a Fujairah-based bunker supplier said, suggesting that downstream competition has intensified in the region.

According to local traders, some flat price sellers have reportedly offered aggressively to capture inquiries consisting of substantial requirements, undercutting the rest of their competitors with by fairly wide margins.

"Recently, competition has been tough, we have even lost all inquiries today," another bunker supplier said, adding that deals were inked at low premiums even for prompt refueling dates.

In addition to the ample HSFO inventories, downstream barging schedules for early refueling requirements were mostly available within same-day to three-day lead times, as buyers could secure bunkers promptly.

Supply adequate, healthy demand

Higher HSFO inflows in H2 July kept inventories well-supplied, while at least two cargoes totaling approximately 734,000 barrels, or 116,000 mt, of HSFO reportedly hailing from Iran and Russia, were expected to land in Fujairah around early-August period, according to industry sources.

HSFO consumption from regional utility sectors rose during the peak summer season in the Middle East to strengthen valuations for part of Q2 and Q3 period, though traders in the region also said that the demand and supply dynamics were "balanced" since July, compared to tighter stockpiles earlier in Q2.

Stockpiles of heavy residues around Fujairah hub, consumed for power generation purposes and as ship fuel, climbed 3% on the week to a two-week high of 9.702 million barrels in the week ended July 29, latest data from the Fujairah Oil Industry Zone showed.

HSFO demand around Fujairah were seen rather decent, or above-average, on most trading days recently, as discounts against prices at Singapore widened significantly owing to tighter-than-usual barging schedules around the world's largest bunkering hub, bunker suppliers said.

As a result, traders in Singapore also noted that some volumes of spot HSFO inquiries were lost to competitive offers available in Fujairah, especially for tankers with the option to refuel in the Middle East or plying along the Arab Gulf-Asia routes.

"Suppliers [in the UAE] are facing a difficult market and high level of competition... Nevertheless, buyers are winners in these conditions," a second trader said.

Spreads between Singapore delivered marine fuel 0.5%S prices versus the same delivered grade at the UAE's bunker hub of Fujairah most recently widened to an over four-month high of $27/mt July 30, before narrowing to $18/mt Aug. 5, Commodity Insights data showed.

Prior to July 26, this HSFO delivered spread between both hubs were last assessed wider at $29/mt March 14 earlier this year.

Moreover, HSFO delivered price spreads between both key hubs averaged $19.33/mt Aug. 1-5, compared with $15.52 in July.

Platts is part of S&P Global Commodity Insights.