Zhoushan's balance-Nov term ex-wharf LSFO bunker premiums surge, supplies tighten

The term contractual ex-wharf 0.5%S marine fuel cargoes for the balance of November's supply at the North Asian bunker hub of Zhoushan were concluded around premiums of $25-$35/mt to the benchmark FOB Singapore 0.5% marine fuel cargo values, traders said, above the $20-$25/mt premiums previously inked for November contracts.

Most recently, however, some volumes of the balance-November term ex-wharf 0.5%S marine fuel contracts were traded closer to $35-$40/mt premiums, according to local traders.

Balance-November parcels are contracts that concluded in November, whereas November's parcels closed prior to August and were available for loading throughout the month.

"Ex-wharf cargo availabilities [for low sulfur fuel oil] has been very short. Recent deals for [balance-November] cargoes were even done at $40/mt premiums," a Zhoushan-based bunker supplier said Nov. 17.

Amid limited bonded fuel oil export quotas in China for the rest of fourth-quarter 2023, the last tranche of 3 million mt allocated during early-September, at least one of the local refiners have reportedly dialed back LSFO production by almost fivefold in November, traders said.

"LSFO bunker demand have reduced lately ... Fewer shipowners were inquiring as we are facing some cargo shortages for prompt supply," the bunker supplier also said.

In addition, severe weather disruptions over the past couple of weeks also slowed bunker demand around the port area of Ningbo-Zhoushan region, traders said.

"Across most players, LSFO stocks should be quite tight, delivered and ex-wharf premiums kept rising. Supplies might even tighten further in the near term," a Zhoushan-based trader said Nov. 17.

Platts Zhoushan-delivered marine fuel 0.5%S bunker premiums over the benchmark FOB Singapore Marine Fuel 0.5%S cargo values rose to an over five-month high of $36.50/mt Nov. 16, up $3.72/mt day on day, according to data by S&P Global Commodity Insights.

This bunker premium was last assessed higher at $50.70/mt on June 1.

While lean stockpiles limited the availability of ex-wharf cargoes on offer, and might plateau bunker sales volumes as a result, some traders also hoped for better margins from downstream LSFO deliveries.

Spreads between Zhoushan's delivered and ex-wharf grade, or also known as barging spreads, averaged $10/mt Nov. 1-16, widening from $7.95/mt across October and $6.54/mt in September, S&P Global data also showed.

Sales of bonded bunker fuel oil around Zhoushan region tumbled 16.3% on the month to 549,300 mt in October, the second consecutive monthly decline, despite marking a 16.9% year-on-year rise, latest data compiled by S&P Global Commodity Insights showed.