East of Suez Market Update 27 Aug

Most prices in East of Suez ports have moved higher, and availability of all grades is tight in Fujairah.

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 up in Fujairah ($25/mt), Singapore ($9/mt) and Zhoushan ($8/mt)
• LSMGO prices up in Fujairah ($25/mt), Singapore ($21/mt) and Zhoushan ($13/mt)
• HSFO prices up in Zhoushan ($13/mt), Fujairah ($5/mt), and down in Singapore ($1/mt)
• B30-VLSFO price up in Singapore ($15/mt)

Fujairah’s VLSFO price has surged by $25/mt over the past day, the steepest increase among the three major Asian bunker ports. The rise has pushed Fujairah’s VLSFO from parity with Zhoushan to a $17/mt premium, while its premium over Singapore has widened to $22/mt.

Fujairah’s HSFO price has also increased, albeit by a more modest $5/mt. As a result, the port’s Hi5 spread has widened from $140/mt to $160/mt, putting it above Singapore’s $146/mt and Zhoushan’s $135/mt.

Tensions between the US and Iran around the Strait of Hormuz continue to constrain bunker fuel supply in Fujairah. VLSFO and LSMGO availability remains tight and broadly unchanged from last week, with only a limited number of suppliers able to offer LSMGO. HSFO supply also remains restricted.

Supply conditions are more comfortable at the nearby Khor Fakkan port, where VLSFO and HSFO remain readily available. Despite the heightened regional tensions, bunker demand has increased at both Fujairah and Khor Fakkan, according to a Middle East-based source.

Brent

The front-month ICE Brent contract has gained by $1.73/bbl on the day, to trade at $87.63/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent’s price has felt some upward pressure amid worsening ties between the US and Iran.

Washington's sweeping economic sanctions and Tehran’s territorial chokehold on the Strait of Hormuz has left the global oil market hostage to violent, unpredictable price swings.

The US announced nearly 60 Iran-related sanctions and threatened of secondary sanctions on the Islamic Republic’s international allies, like China, earlier this week. 

Beijing dismissed Washington’s economic campaign against Iran, pulling directly into the US-Iran crossfire.

Downward pressure:

Brent’s price gains were capped by some positive news coming out of the latest Iran-Oman meeting.

Both countries’ foreign ministers held constructive talks to establish a temporary navigational corridor through the Strait of Hormuz – jointly controlled by Tehran and Muscat.

“Iran and Oman appear closer to an agreement on shipping routes through the Strait of Hormuz,” two analysts from ING Bank noted.

Market analysts have interpreted the news as a potential step toward restoring some commercial navigation through the waterway that once carried one-fifth of global seaborne oil flows.

“We would likely need to see the US lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalisation,” ING Bank’s analysts said.

By Tuhin Roy and Aparupa Mazumder

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