South Korea's LSFO bunker H2 Nov outlook dampens on lean demand, ample stocks

The South Korea-delivered marine fuel 0.5%S bunker premium fell to a near 21-month low Nov. 15 amid subdued demand and eager selling activity at the key North Asian port of South Korea, dampening its outlook for the rest of November.

The Platts-assessed South Korea-delivered marine fuel 0.5%S bunker premium over benchmark FOB Singapore marine fuel 0.5%S cargo values slipped to a near 21-month low of $15.28/mt Nov. 15, down $18.78/mt day on day, according to S&P Global Commodity Insights data.

This premium was last assessed lower at $11.57/mt Feb. 28, 2022, the data showed.

"Despite the steep drop in South Korea's [LSFO] bunker prices, the volume of inquiries since November has not increased," a South Korea-based trader said Nov. 16. "Weaker premiums are also driven by supply-side dynamics too."

For the second half of November, at least two of the local refiners were reportedly very keen to offer out lots for prompt LSFO refueling dates owing to healthy supplies in the upstream market, industry sources said Nov. 16.

"LSFO [bunker] premiums almost went down to flat [against upstream cargo valuations], because supplies are very ample for this month," according to a South Korean refiner Nov. 16.

Due to lagging demand in the downstream market, at least two of South Korea's other refiners were also reportedly allocating more stocks toward upstream cargo sales, as bunker premiums were seen "too low," sources also said.

"Some players rather sell off LSFO as cargoes, so their supply for a spot [bunker] isn't much, but will offer selectively at higher premiums," a second South Korean trader said Nov. 16.

Out of the two local refiners expectedly offering out LSFO aggressively for H2 November to capture the limited inquiries, one of it has reportedly earmarked half of its available cargoes for term contract buyers, traders said.

"Sizable inquiries even around 6,000 mt per lot were seen as well. Inquiries for December have recently also been showing up too, which was less frequent before," the first trader said, adding that these requirements provide brief respite to the local market at times.

"Demand is poor, but might be coming back slowly due to low premiums," the refiner also said, adding that refueling lead times can be as prompt as three days out.

Initially, bunker suppliers in South Korea harbored hope of better demand, as LSFO prices have slipped to levels very competitive against most of the other key ports in North Asia.

Spreads of South Korea's delivered marine fuel 0.5%S bunker prices versus the same deliver grade at the hub of Zhoushan tumbled to a near 12-month low of minus $17.50/mt Nov. 15, down $25.25/mt on the day, the lowest since Nov. 29 in 2022, S&P Global data showed.