Singapore’s 2024 Hi5 spread to remain broadly steady with last year - WoodMac

The average Hi5 spread in Singapore is expected to be around $150/mt this year, almost steady with the 2023 average, Wood Mackenzie’s (WoodMac) research director Mark Williams told ENGINE.

PHOTO: Cargo terminal at the Port of Singapore. Getty Images

“We see the annual Hi5 spread in Singapore remaining broadly like 2023 levels at US$150/tonne on an annual average basis,” Williams said.

WoodMac, a UK-based research firm, forecasts that Singapore's HSFO prices will rise due to tight global HSFO supply, while its VLSFO prices will weaken due to increased global supply. As a result, the port's Hi5 will average around $150/mt in 2024, almost steady with last year's average.

OPEC+ is likely to increase production in the second half of this year to maintain balance in the oil market. This may lead to increased HSFO supply and consequently widen Singapore’s Hi5 spread in the second half of this year, Williams said.

Production cuts by OPEC+ and the ongoing Russia-Ukraine war have curbed supply of sour and heavy crude grades. These limitations have coupled with factors like reduced access to sour crude grades to tighten HSFO supply, particularly in the ARA hub.

Global HSFO output from refineries tightened last year, diverting Russian barrels from Europe to the Middle East and Asia. This shift was driven by increased demand from Indian and independent Chinese refiners seeking HSFO as an alternative feedstock in the absence of heavy OPEC crude barrels, Williams said. Consequently, HSFO cracks strengthened, and the West-East HSFO spread widened.

The VLSFO market has been relatively weaker, influenced by declining global economic activity, subdued bunker demand and increased global supply from new refineries, Williams argued.

Singapore’s Hi5 spread momentarily dropped to $39/mt last year, but averaged around $157/mt in 2023, according to ENGINE data. That was $50/mt wider than Rotterdam's $107/mt average.

In the near term, factors such as increased bunker demand from Red Sea vessel diversions, and robust Chinese demand for Russian refinery feedstocks like fuel oil, are expected to keep Hi5 spreads narrow in global bunker hubs, Williams noted.

He emphasised that Hi5 spread projection is uncertain and that the real Hi5 spread could be affected by factors such as the extent of Red Sea vessel diversions, the pace of Nigeria’s Dangote refinery ramping up production and its impact on VLSFO supply, as well as the stability of supply from Kuwait’s Al Zour refinery.

By Tuhin Roy

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