East of Suez Market Update 4 May

Bunker fuel prices in East of Suez ports have moved in mixed directions, and availability across all grades is tight in Zhoushan.

IMAGE: Aerial view of Zhoushan City, Zhejiang Province. Getty Images

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

• VLSFO prices up in Singapore ($31/mt), Fujairah ($21/mt), and down in Zhoushan ($18/mt)
• LSMGO prices up in Singapore ($25/mt), and down in Zhoushan ($40/mt) and Fujairah ($9/mt)
• HSFO prices down in Fujairah, Zhoushan ($12/mt) and Singapore ($3/mt)
• B30-VLSFO prices down in Singapore ($268/mt)

Singapore’s HSFO price has dropped over the weekend, driven by a lower-priced 150–500 mt stem fixed in the port.

Meanwhile, Singapore’s VLSFO price has gained the most among the major Asian bunker hubs, widening its Hi5 spread from $70/mt on Friday to $104/mt now. At $104/mt, the port's Hi5 spread is currently narrower than $185/mt in Fujairah and wider than $82/mt in Zhoushan.

Prompt bunker fuel availability in Zhoushan is tight across all fuel grades, with several suppliers reporting depleted stocks.

VLSFO lead times in the Chinese port stands at 8-10 days, while LSMGO and HSFO deliveries require 6-9 days.

Brent

The front-month ICE Brent contract has moved $2.17/bbl lower on the day from Friday, to trade at $109.61/bbl, at 17.00 SGT (09.00 GMT) today.

Upward pressure:

The Middle East conflict – now in its third month – has kept Brent’s price well above $100/bbl as the Strait of Hormuz closure remains the biggest concern for the oil market, according to analysts.

The US Central Command (CENTCOM) said it will start a new operation in the Strait of Hormuz to restore navigation through the highly crucial oil chokepoint.

The Strait of Hormuz handled about 20% of the world's global seaborne oil flows before the Middle East war broke out on 28 February.

“Crude oil prices rallied… as a US-Iran peace deal looked increasingly unlikely and raising the prospect of a sustained disruptions to oil supplies,” ANZ Bank’s senior commodity strategist Daniel Hynes said. “Peace talks have been stalled as both sides refuse to move on their respective red lines,” he added.

Downward pressure:

The front-month ICE Brent contract has changed from June to July, which goes a long way to explain the recent drop in price.

Brent's June contract was trading around $120/bbl on Thursday. However, the July contract opened near $111/bbl on Friday, accounting for much of the roughly $9/bbl decline. 

Last week was quite volatile for the oil market amid "the expiration of the ICE Brent Jun-26 contract on Thursday,” ING Bank’s analysts said.

Brent crude’s price gains were further capped by a rise in US crude oil rig activity.

The total number of rigs drilling for crude oil in the US rose by one to 408 units last week, according to Baker Hughes.

The US oil rig count is seen as an indicator of future oil production. It reflects how much oil drilling activity is happening or expected to happen in the shale sector.

By Aparupa Mazumder

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