Zhoushan's November LSFO storage availability eases from record highs

Low sulfur fuel oil storage available for lease at Zhoushan, China's largest bunkering hub, stood at 2.08 million cu m as of Nov. 5, easing 5.88% from record highs in October and doubling to around 103% higher year over year, according to Zhejiang Mercantile Exchange data. Local refineries imported more fuel for November as available export quotas dwindled.

In October, low sulfur fuel oil storage surged to 2.21 million cu m, reaching an all-time high due to steadily depleting stockpiles in Zhoushan.

With the smaller-than-anticipated 1 million mt of fuel oil export quotas released for LSFO in September, local bunker suppliers had to deal with much tighter supply levels for the remainder of the year.

China has allocated a total of 13 million mt of export quotas for LSFO so far, down 1.29% year over year.

“I heard suppliers imported fuels from Singapore due to limited export quota issue,” a Zhoushan-based trader said, adding that some of the largest Chinese oil companies imported more in November.

S&P Global Commodity Insights data showed that the price spread between Zhoushan-delivered marine fuel 0.5% bunker and the same delivered grade in Singapore widened to $14.28/mt in October, up from $5.29/mt in September.

The spread was last assessed to be $11/mt on Nov. 4, Commodity Insights data showed.

According to a refinery source, a Sinopec refinery in East China will not produce any LSFO in November-December as there are not enough quotas left to support the bunkering.

The source also believes it is unlikely that another batch of export quotas will be allocated in the coming months.

While current demand for low sulfur fuel oil remains sufficient, market sources are uncertain about how market dynamics will evolve for the rest of the month.

Dismal weather conditions that previously plagued Zhoushan have abated, allowing barging operations to gradually resume as local suppliers aim to fulfill the backlog of orders.

Platts-assessed premiums for Zhoushan-delivered marine fuel 0.5%S bunker over benchmark FOB Singapore marine fuel 0.5%S cargo values averaged $36.58/mt in October, up from an average of $32.13/mt in September, Commodity Insights data showed.

Platts, part of Commodity Insights, assessed the premium at $31.15/mt on Nov. 4, edging higher 17 cents/mt or 0.55% on the day.

Overall tank utilization rates at Zhoushan widened 1.70 percentage points on the month to 41.12% as of Nov. 5, with 8.661 million cu m of storage available for lease out of a total capacity of 14.710 million cu m, according to the ZME data.

Crude oil storage availability fell 3.34% month over month but nearly tripled to 191.92% higher year over year at 2.89 million cu m in November, having peaked in September since ZME data became publicly available in May 2022.

Apart from crude and LSFO, storage availability for gasoline rose on the month, while that of diesel fell on the month in November.

Global crude stocks outside of China are currently on the low side, and it is not expected to see large builds until H1 2025, according to Commodity Insights analysts Nov. 4.

Meanwhile, storage availability of naphtha and jet fuel remained unchanged from October.