East of Suez Market Update 2 June

Prices in East of Suez ports have moved in mixed directions, and availability is tight in the UAE ports of Fujairah and Khor Fakkan.

IMAGE: Container ships and gantry cranes in Port Khor Fakkan, UAE. Sharjah Ports

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

• VLSFO prices down in Fujairah ($32/mt), Zhoushan ($13/mt) and Singapore ($3/mt)
• LSMGO prices up in Fujairah ($2/mt), and down in Zhoushan ($79/mt) and Singapore ($15/mt)
• HSFO prices up in Zhoushan ($18/mt), Fujairah ($4/mt) and Singapore ($1/mt)
• B30-VLSFO price down in Singapore ($23/mt)

Fujairah’s VLSFO price has fallen by $32/mt over the past day, marking the sharpest decline among the three major Asian bunker hubs. Despite the drop, Fujairah continues to command substantial premiums, with VLSFO priced $200/mt above Zhoushan and $189/mt higher than Singapore.

“Middle Eastern ports are currently operating with improved but still unstable conditions following the [partial] reopening of the Strait of Hormuz. Overall situation is better compared to the previous period, however availability remains limited in some locations,” a regional source said.

“Overall, the market is improving, but remains sensitive and subject to prompt changes in availability and pricing,” the source added.

Bunker availability in the UAE ports of Fujairah and Khor Fakkan has tightened significantly, with only a handful of suppliers currently offering fuel and many selectively responding to enquiries, according to a trader.

For VLSFO and LSMGO, only one supplier currently has stocks in Fujairah, with most offers issued on a firm enquiry basis. HSFO availability is slightly better, with two suppliers able to provide the grade.

In Khor Fakkan, availability remains constrained across all fuel grades, with suppliers largely assessing requests on a case-by-case basis.

The tight supply situation is primarily due to a lack of incoming cargoes, leaving barges without product to load. While fresh cargo arrivals were expected over the past two weeks, there is still no clear indication of when they will materialise.

Barges that had already loaded product continue to offer fuel until inventories are exhausted, though most of these volumes have already been sold. Suppliers warn that Fujairah and Khor Fakkan could run dry in the coming days if the expected cargoes fail to arrive and the remaining barge stocks are fully booked.

Even if replenishment cargoes arrive, bunker prices could continue to command premiums, the trader added.

Brent

The front-month ICE Brent contract has declined by $0.89/bbl on the day, to trade at $93.26/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent’s price has felt upward pressure following reports that Iran is stepping back from the ongoing negotiations with Washington and moving ahead with a complete blockade of the Strait of Hormuz.

The breakdown in negotiations comes shortly after Israel’s military moved further inside Lebanon, raising concerns of a broader Middle East conflict.

Meanwhile, Oman’s Maritime Security Centre (MSC) issued an advisory for all vessels to exercise extreme caution after sighting a suspected floating mine in the region.

Crude oil prices can surge to $180/bbl by August if the US-Iran conflict intensifies and the Strait of Hormuz remains closed, Jorge León, head of geopolitical analysis at Rystad Energy, said in an interview with CNBC.

“Oil price direction continues to be dictated by Iran-related headlines amid considerable uncertainty over how negotiations between the US and Iran are progressing,” two analysts from ING Bank noted.

Downward pressure:

Despite the absence of significant bearish drivers, Brent’s price has declined today.

Market participants will be watching closely for any further signs of progress in US-Iran negotiations.

“President Trump says that negotiations are continuing,” ING Bank’s analysts noted.

Negotiators from both sides agreed on a draft memorandum of understanding last week to extend the ceasefire and lift restrictions on shipping through the Strait of Hormuz.

By Tuhin Roy and Aparupa Mazumder

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