East of Suez Market Update 26 Aug

Regional bunker benchmarks have declined, while bunkering operations at all Zhoushan anchorages have been suspended this week due to an unusual run of typhoons.

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 down in Zhoushan ($36/mt), Singapore ($32/mt) and Fujairah ($20/mt)
• LSMGO prices down in Singapore ($74/mt), Fujairah ($59/mt) and Zhoushan ($58/mt)
• HSFO prices down in Fujairah ($31/mt), Singapore ($29/mt) and Zhoushan ($16/mt)

Zhoushan’s VLSFO price has dropped by $36/mt over the past day, the sharpest decline among the three major Asian bunker ports. The fall has erased Zhoushan’s VLSFO premium over Fujairah and narrowed its premium over Singapore to $6/mt.

Zhoushan's HSFO price has also declined, although by a more modest $16/mt. This has narrowed the port’s Hi5 spread from $160/mt to $140/mt, leaving it slightly above Singapore’s $136/mt and on par with Fujairah.

Despite subdued bunker demand, VLSFO availability in Zhoushan remains tight. Suppliers are now recommending lead times of around 10 days, compared with 7-10 days a week earlier. Lead times for LSMGO and HSFO have similarly lengthened to around 10 days from 7-10 days previously.

The continued supply tightness is largely a knock-on effect of the two-week suspension of bunkering operations following Typhoon Dolphin, which resulted in significant delivery backlogs. Bunker supply could remain under pressure as bunkering at Zhoushan’s inner and outer anchorages has once again been suspended this week due to rough weather triggered by four successive cyclones, according to a source.

Hong Kong’s bunker market, meanwhile, remains largely unchanged, with suppliers continuing to recommend lead times of around seven days for all major fuel grades.

Brent

The front-month ICE Brent contract has declined by $4.24/bbl on the day, to trade at $85.90/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent crude’s price has felt some upward pressure amid the escalating conflict between US and Iran.

China has formally dismissed Washington’s economic campaign against Iran, calling it “illicit and unilateral.”

The US, yesterday, announced nearly 60 Iran-related sanctions and threatened imposing secondary sanctions on international allies who continue trading with Iran. 

By threatening secondary penalties on any nation continuing to trade with Tehran, these sweeping sanctions pull Beijing directly into the US-Iran economic crossfire.

Downward pressure:

Brent crude’s price has plunged below $90/bbl mark after the American Petroleum Institute (API) reported a surprise build in US crude stocks.

Commercial US crude oil inventories increased by 4.2 million bbls in the week ending 21 August, according to API estimates.

The increase was well above market expectations for a 1.9 million-bbl build.

A build in US crude stocks typically indicates lower demand for oil and can put some downward pressure on Brent's price.

By Tuhin Roy and Aparupa Mazumder

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