East of Suez Market Update 24 June

Most prices in East of Suez ports have declined, and availability of all grades has improved at the UAE's Port of Fujairah.

IMAGE: Container ships and gantry cranes in Port Khor Fakkan, UAE. Sharjah Ports

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

• VLSFO prices down in Fujairah ($49/mt), Zhoushan ($20/mt) and Singapore ($1/mt)
• LSMGO prices down in Zhoushan ($101/mt), Fujairah ($22/mt) and Singapore ($19/mt)
• HSFO prices up in Zhoushan ($88/mt), and down in Fujairah ($18/mt) and Singapore ($14/mt)
• B30-VLSFO price down in Singapore ($25/mt)

Fujairah’s VLSFO price has fallen by $49/mt over the past day, marking the sharpest decline among the three major Asian bunker hubs. Despite the drop, the port’s VLSFO benchmark continues to trade at hefty premiums of $353/mt to Zhoushan and $296/mt to Singapore.

Bunker fuel availability has improved across all grades in Fujairah, with several suppliers now able to accommodate prompt delivery requests. The improvement follows the signing of a memorandum of understanding between Iran and the US, which includes the reopening of the Strait of Hormuz.

Prior to the agreement, suppliers had been contending with tight cargo supplies as reduced imports limited replenishment volumes for bunker barges. However, the situation has eased after a number of cargoes arrived in recent days, with additional deliveries expected shortly, according to a Middle East-based source.

Weak bunker demand has also contributed to the improved supply position in the port, the source added.

Most suppliers in Fujairah can currently offer prompt VLSFO stems, while a smaller number have LSMGO available. HSFO availability has also improved, with some suppliers able to supply the grade.

Supply conditions have also strengthened at the neighbouring UAE bunker hub of Khor Fakkan, where availability of both VLSFO and HSFO has improved.

Brent

The front-month ICE Brent contract has declined by $1.66/bbl on the day, to trade at $75.70/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent crude’s price has felt some upward pressure after the American Petroleum Institute (API) reported another decline in crude stocks.

US crude oil inventories recorded a decline of 765,000 bbls in the week ending 19 June, according to the API.

A fall in US crude stockpiles is generally seen as a sign of stronger oil demand and can provide upward support to Brent’s price.

Meanwhile, Strategic Petroleum Reserve (SPR) inventories have declined by another 9.1 million bbls to 331.2 million bbls in the previous week, “the lowest level in more than four decades and nearly 394 million barrels below maximum capacity,” according to Trading Economics.

Downward pressure:

Oil has come under further downward pressure as vessel traffic through the region’s most important chokepoint seem to gradually recover.

US President Donald Trump claimed yesterday that 19 million bbls of oil flowed out of the Strait on Monday.

“Oil prices continue to move lower as flows from the Persian Gulf start to recover,” two analysts from ING Bank noted.

Since the onset of the US-Iran conflict, the Strait of Hormuz has remained largely closed to commercial traffic, first due to Iran’s de facto closure, and subsequently by a US blockade.

“Price action suggests the market is assuming a rapid recovery in traffic through the Strait of Hormuz,” the analysts added.

By Tuhin Roy and Aparupa Mazumder

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