Fujairah April term ex-wharf bunker premiums normalize after brief spike

Ex-wharf marine fuel 0.5%S cargoes for balance-April term contractual supply at the UAE's bunkering hub of Fujairah have been concluded at premiums in the $3-$8/mt range to benchmark FOB Singapore marine fuel 0.5%S cargo values, following brief spikes to double-digits in the week ended April 14, traders in Fujairah told S&P Global Commodity Insights April 20.

Two crude distillation units with a total processing capacity of about 410,000 b/d at Kuwait Petroleum Corp's Al-Zour's refinery went offline in the week ended April 14 following technical glitches, stoking fears of low sulfur fuel oil cargo shortages which led ex-wharf premiums to soar.

But the bullishness was short-lived as LSFO cargo availability has been ample for downstream requirements. S&P Global reported April 14 citing the company that CDU 1 was expected to restart shortly.

The traders said April ex-wharf LSFO cargo premiums have shrunk to low-single digits in the week started April 17, with highest offers around a $10/mt premium.

"[LSFO ex-wharf] prices spiked when KPC's units when down. Cargo premiums surged on expected tightness, but developments have proved otherwise. So, there was a mismatch," a Fujairah-based bunker supplier said, citing adequate inventories.

In March, ex-wharf LSFO cargoes for April supply were offered at premiums in the $3-$5/mt range, below March-loading ex-wharf term contracts that traded at premiums in the $4-$11/mt range, the traders said.

Some April ex-wharf LSFO cargoes were concluded at a peak premium of about $20/mt as offers surged after the Al-Zour incident, though the quantities were limited, according to the traders.

"The buyer could have been in a desperate situation to pay for such [exorbitant] premiums," the bunker supplier said, adding that the downstream bunker market has been weak.

Fujairah heavy distillates stocks rose for the second straight week, advancing 6.5% week on week to a three-week high of 10.867 million barrels, Fujairah Oil Industry Zone data provided exclusively to S&P Global showed April 19.

Bumpy bunker demand

Most Fujairah downstream suppliers have been unwilling to purchase ex-wharf LSFO cargoes at high premiums because of lukewarm demand, except to plug shortages for delivered fixtures, the traders said.

"The delivered market followed [the uptrend] briefly but weakened in recent days, due to the possibility of KPC's recovery anytime soon," a second Fujairah-based bunker supplier said.

Platts, part of S&P Global, assessed Fujairah-delivered marine fuel 0.5%S bunker premiums over FOB Singapore marine fuel 0.5%S cargo values at an average of $10.80/mt over April 17-18, down from $13.95/mt in the week ended April 14.

"LSFO delivered premiums lost steam quickly, as seen in the last couple of days with competitive offers," the second bunker supplier said.

Sales of International Maritime Organization-compliant LSFO bunker fuel rebounded in March and rose 15.8% on the month to 451,655 cu m following record low volumes in February, according to the latest FOIZ data. The sales, however, fell 14.5% year on year and were the second lowest since FOIZ began providing the data to S&P Global in 2021.

"Inconsistent" end-user demand in the week started April 17 is likely to cap LSFO ex-wharf requirements and continue to pressure bunker premiums, the traders said.