The days of picking and choosing from a range of bunker fuels at ports are disappearing as geopolitics cause oil flows to shift, meaning shippers must plan more carefully ahead to ensure they can buy the fuel they need, an official at TFG Marine said.
Russia has been a key provider of 3.5% (high) sulfur fuel oil but following sanctions on its oil and with companies looking to avoid dealing with Russian counterparties, availability at some ports has become trickier while at others it has become more readily available. That has distorted traditional price premiums.
Russia’s export volumes have, though, held relatively steady. In November, it exported 2.17 million mt of fuel oil compared to a three-month average of 2.08 million mt, according to Kpler shipping data.
It is the direction that is changing: The Netherlands, which received 38,000 mt in February, has received none since August when traders became concerned about EU sanctions affecting the fuel, while the UAE received 40,000 in November compared to 9,000 mt in February, the Kpler data showed.
“We are definitely seeing a change on pricing of HSFO in the bigger hubs,” Kenneth Dam, global head of bunkering at TFG Marine, said on the sidelines of the S&P Global Commodity Insights Barcelona Bunker Fuel Conference 2022.
Fujairah has seen growing volumes of HSFO deliveries since European markets started avoiding buying Russian product, market sources said.
That has seen inventories at the Middle Eastern bunker hub rise and, in turn, prices fall significantly below those of Singapore in November. The two ports have traditionally seen prices much more closely aligned than at present, S&P Global data showed.
Since Nov. 7, Platts, part of S&P Global, has assessed delivered HSFO at Fujairah at a discount of $32-60/mt to Singapore. Until that point, the 2022 average was a premium of $10/mt and in 2021 the average was a $5/mt premium.
The higher prices at Singapore have also been exacerbated by logistical bottlenecks at the port, although these have been dissipating and so the price spread may now decrease to an extent, according to market sources.
New flows arising from geopolitical considerations will mean “new situations” in supply to markets, Dam said. “I am very bullish on areas such as Africa, other Asian regions and Latin America.”
“Looking over the history of bunkering, availability of bunker fuel has been very easy, meaning clients have not had to get used to thinking twice about where they will send their ships.”
However, that “bunker supermarket”, was over and shippers will have to be a lot smarter with data and integrated systems to ascertain availability of product before they arrive at ports, Dam said.
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