East of Suez Market Update 16 Mar

Prices in East of Suez ports have moved in mixed directions, and availability of all grades is tight in Zhoushan.

IMAGE: Aerial view of Zhoushan, Zhejiang, China. Getty Images

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

• VLSFO prices up in Zhoushan ($19/mt), and down in Singapore ($5/mt) and Fujairah ($4/mt)
• LSMGO prices up in Zhoushan ($45/mt), Singapore and Fujairah ($5/mt)
• HSFO prices down in Zhoushan ($69/mt), Fujairah ($2/mt) and Singapore ($1/mt)

Zhoushan’s VLSFO price has risen by $19/mt over the weekend, while prices in Singapore and Fujairah have dipped slightly. Despite the increase, Zhoushan’s VLSFO still trades at significant discounts of $92/mt and $36/mt to Fujairah and Singapore, respectively.

The sharp rise has been driven largely by higher crude prices amid escalating tensions in the Middle East, particularly around the Strait of Hormuz, which have pushed bunker fuel prices higher across Asia.

Amid the situation, China has ordered an immediate ban on refined fuel exports in March to curb a potential domestic fuel shortage resulting from the Middle East escalation, according to a source.

At Zhoushan, recommended lead times for both VLSFO and LSMGO remain at 5–10 days, largely unchanged from last week. HSFO supply, however, has improved, with lead times of around 5–10 days. Last week, most suppliers were running low on inventories and refraining from offering any lead time indications for the grade, the source added.

In Taiwan, supply has so far seen “not so much impact.” However, prices have reacted more strongly, as the Brent rally triggered by escalating tensions in the Middle East significantly influenced bunker prices over the weekend, a trader said.

Recommended lead times for VLSFO and MGO in Keelung, Taichung and Hualien are around two days, while Kaohsiung currently requires around four days, due to CPC MGO barge maintenance and a separate barge glitch.

Brent

The front-month ICE Brent contract has gained by $5.08/bbl on the day from Friday, to trade at $105.27/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent crude’s price has remained well above $100/bbl as Middle East tensions flared over the weekend.

US forces hit Iranian military bases on the strategic Kharg Island over the weekend, escalating concerns over oil supplies.

Kharg Island handles “more than 80% of Iran’s oil exports,” according to ANZ Bank’s senior commodity strategist Daniel Hynes.

Elsewhere, oil loading operations have been suspended at the UAE port of Fujairah after an Iranian drone strike started a fire in the petroleum industrial zone, Reuters reported today citing two sources.

Fujairah exports about 1 million b/d of UAE’s Murban crude oil, the report added.

“Fujairah, linked to Abu Dhabi’s oilfields by pipeline and serving as a major trading point for crude and refined products, plays a crucial role in regional and global energy flows,” Hynes said.

Downward pressure:

The total number of rigs drilling for crude oil in the US rose by one to 412 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 Tuhin Roy and Aparupa Mazumder

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