East of Suez Market Update 24 July

Prices in East of Suez ports have moved in mixed directions, and VLSFO availability is tight in Zhoushan.

IMAGE: Night scene of Zhoushan, close to the dock on Putuo island. Getty Images

Changes on the day to 17.00 SGT (09.00 GMT) today:

• VLSFO prices up in Singapore ($2/mt), and down in Fujairah ($43/mt) and Zhoushan ($18/mt)
• LSMGO prices up in Zhoushan ($66/mt), and down in Fujairah ($33/mt) and Singapore ($8/mt)
• HSFO prices up in Zhoushan ($10/mt), and down in Singapore ($13/mt) and Fujairah ($8/mt)
• B30-VLSFO price up in Singapore ($20/mt)

Fujairah’s VLSFO price has dropped by $43/mt, a much steeper decline than Zhoushan’s $18/mt, while Singapore’s price has remained broadly stable. As a result, Fujairah’s VLSFO price has shifted from a premium to a $30/mt discount against Singapore, while its premium over Zhoushan has narrowed to just $4/mt.

Fujairah’s HSFO price has fallen by a more modest $8/mt, reducing the port’s Hi5 spread from $234/mt to $199/mt. The spread remains higher than Zhoushan’s $168/mt, but lower than Singapore’s $228/mt.

Despite escalating US-Iran tensions in the Strait of Hormuz, bunker fuel availability in Fujairah has improved. VLSFO and LSMGO supply has eased, with several suppliers now able to accommodate prompt delivery requests. HSFO availability, however, has tightened and is largely being offered only on a firm enquiry basis.

In Zhoushan, VLSFO availability has tightened despite softer demand, with recommended lead times increasing to around 12 days, up from about eight days previously. A source attributed the longer lead times to limited refinery supply.

Meanwhile, bunkering operations at Zhoushan’s outer Tiaozhoumen and Xiazhimen anchorages resumed midweek after being suspended since 7 July due to adverse weather. Operations at Xiushandong anchorage and Mazhi’s inner anchorage had already resumed on Wednesday last week, the source added.

Brent

The front-month ICE Brent contract has lost $0.14/bbl on the day, to trade at $97.68/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent crude’s price has held largely steady amid supply disruption concerns.

The US Central Command (CENTCOM) has been striking Iran for 13 consecutive days, while Tehran has conducted further rounds of retaliatory attacks on US allies in the Gulf.

“Further escalation in the Persian Gulf and fears of a widening conflict are putting a significant amount of oil supply at risk,” two analysts from ING Bank noted.

The Red Sea has also become a major point of concern for the oil market after Yemen’s Iran-backed Houthi militants struck two Saudi Arabian crude oil tankers yesterday.

“Houthi attacks on Saudi vessels in the Red Sea have the potential to widen this conflict, leading to further escalation,” ING Bank’s analysts said.

Downward pressure:

An unexpected increase in US crude stocks has put some downward pressure on Brent’s price this week.

US crude oil inventories gained by 2 million bbls to 411.7 million bbls in the week ending 17 July, according to data from the US Energy Information Administration (EIA).

The American Petroleum Institute (API) reported a slightly higher inventory rise of 2.6 million bbls during the same week.

A build in US crude stocks can indicate lower demand for oil.

By Tuhin Roy and Aparupa Mazumder

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