The global market for low sulfur marine fuel (LSFO), a refined product derived from petroleum, is under increasing pressure. In Singapore, the main bunkering hub, the price differential with Fujairah fell to its lowest level in three months, reaching $4/mt according to Platts’ assessments on November 22. This situation is fueled by sluggish demand and increased competition in the region.
Local traders report that premiums for LSFO in Singapore continue to erode in the face of well-stocked inventories and low spot trading volume. A slight increase in requests for deliveries in January was noted, but it remains insufficient to compensate for the general weakening of the market.
Abundant supply and falling premiums in Singapore
LSFO supplies to Singapore remain plentiful, with arbitrage cargoes scheduled for late November and the first half of December. This increased availability puts downward pressure on premiums. On November 22, the LSFO premium in Singapore, compared to the FOB (free on board) benchmark, reached $11.83/mt, its lowest level in four months.
Additionally, the spot differential against the Mean of Platts Singapore (MOPS) index declined to $4.21/mt, recording a steady decline since October. Local suppliers face increasing competition from Malaysia and China, which offer competitive alternatives, increasing pressure on prices.
Fujairah: impact of geopolitical tensions
In Fujairah, in the Middle East, the LSFO market is feeling the impact of geopolitical tensions. The reduction in maritime travel via the Red Sea, due to increased war risk premiums in the Israel-Iran conflict, has led to a significant drop in demand. Local traders indicate that barge availability remains high, but ordered volumes remain low.
The premium for LSFO delivered to Fujairah had plunged to a 13-month low of $4/mt on November 20, before recovering slightly to $7.83/mt on November 22. Despite this recovery, suppliers remain cautious in their cargo purchases for December, anticipating fragile margins and limited prospects.
The outlook remains uncertain
Traditionally, the fourth quarter is marked by an increase in demand linked to the holiday season. This year, expectations remain low, with traders noting a persistent slowdown in volumes. Suppliers are carefully monitoring cargo flows and geopolitical developments that may influence global demand and prices for LSFO.
