East of Suez Market Update 31 July

Prices in East of Suez ports have declined, and VLSFO and HSFO availability is good in Khor Fakkan.

IMAGE: Aerial view of Saudi Arabian port of Jeddah with cargo ships and dry docks. Getty Images

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

• VLSFO prices down in Fujairah ($38/mt), Zhoushan ($34/mt) and Singapore ($29/mt)
• LSMGO prices down in Zhoushan ($77/mt), Fujairah ($68/mt) and Singapore ($62/mt)
• HSFO prices down in Zhoushan ($37/mt), Singapore ($30/mt) and Fujairah ($27/mt)
• B30-VLSFO price down in Singapore ($43/mt)

VLSFO prices across the three major Asian bunker ports have fallen by $29-38/mt over the past day, with Fujairah recording the sharpest decline. Fujairah's VLSFO price is now at a $5/mt premium to Zhoushan but trades at a $12/mt discount to Singapore.

Renewed US-Iran hostilities in the Strait of Hormuz have further tightened bunker fuel availability in Fujairah. Supplies of VLSFO and LSMGO are more constrained than they were last week, when prompt deliveries were still available. Only a limited number of suppliers can currently offer LSMGO, while HSFO remains scarce and is generally available only on a firm enquiry basis.

Availability is better at the neighbouring UAE bunker hub of Khor Fakkan, where VLSFO and HSFO are readily available. However, bunker demand has softened in both Fujairah and Khor Fakkan following the renewed regional conflict, according to a Middle East-based source.

In Saudi Arabia's Jeddah, VLSFO and LSMGO availability remains steady despite an increase in demand.

Brent

The front-month ICE Brent contract has declined by $3.38/bbl on the day, to trade at $88.28/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent crude’s price is poised to end this month almost 20% higher than June, as the crisis in the Middle East continues to escalate.

Echoing Iran’s playbook in the Strait of Hormuz, Yemen’s Houthi militants are planning to impose a toll fee on commercial vessels attempting to transit the Bab al-Mandeb Strait into the Red Sea.

“Tanker traffic through the Bab al-Mandeb Strait has slowed, given the risk of attack from the Houthis in Yemen,” two analysts from ING Bank noted.

Bab al-Mandeb is another vital oil chokepoint, like the Strait of Hormuz, carrying about 7% of global seaborne oil flows.

Fresh attacks in the region threaten to deepen the global energy crisis, as traffic through the Strait of Hormuz is already facing severe disruption.

Downward pressure:

The drop in Brent’s price comes despite little improvement in tensions between the US and Iran.

According to market analysts, the weakness in oil prices can be attributed to the slightly improved vessel traffic through the Strait of Hormuz.

“Though [vessels transiting through the strait] still in single digits, there are also reports that the shuttling of oil across the strait has resumed,” ING Bank’s analysts remarked.

‘Shuttling of oil’ refers to tankers making short-distance trips to move crude oil across or out of the Persian Gulf, often to transfer it to larger vessels or bypass disrupted areas.

“This will not be detected by tracking data, given that transponders will be turned off,” ING Bank’s analysts said.

Moreover, US energy secretary Chris Wright claimed in an interview with Bloomberg that 13 million b/d of oil left the Persian Gulf over the past week

Considering Wright's claim - with roughly half moving through the strait and the remainder diverted through bypass pipelines - ING Bank’s analysts noted that this volume still translates to roughly 65% of pre-war levels.

By Tuhin Roy and Aparupa Mazumder

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