East of Suez Market Update 29 Sep

Most prices in East of Suez ports have moved lower, while availability of all grades remains extremely tight in Fujairah.

IMAGE: Vessel docked at berth in Fujairah, UAE. Port of Fujairah

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

• VLSFO prices up in Zhoushan ($1/mt), and down in Fujairah ($69/mt) and Singapore ($36/mt)
• LSMGO prices down in Fujairah ($107/mt), Singapore ($51/mt) and Zhoushan ($33/mt)
• HSFO prices up in Zhoushan ($14/mt), and down in Singapore ($19/mt) and Fujairah ($12/mt)
• B30-VLSFO price down in Singapore ($23/mt)

Fujairah's VLSFO price has fallen by $69/mt, the steepest decline among the three major Asian bunker ports. The price now stands at a $73/mt premium over Singapore and a $51/mt discount to Zhoushan. The premium over Singapore has narrowed from $106/mt, while Fujairah's benchmark has slipped from a $19/mt premium over Zhoushan into a discount. It is the steepest one-day fall in Fujairah's VLSFO price since early July.

Fujairah's LSMGO price has dropped by $107/mt, the largest decline of any grade in the port, while HSFO price has eased by $12/mt.

“Current [bunker supply] situation in the Middle East is still quite tight, particularly around Fujairah, where bunker availability remains constrained and prices are volatile due to the regional situation,” a Middle East-based trader said.

Bunker supply in Fujairah remains severely restricted as US-Iran tensions continue to disrupt vessel traffic through the Strait of Hormuz, according to a regional source. Availability of all major grades is extremely limited, while fuel oil arrivals have dropped sharply amid heightened uncertainty across the region. Replenishment cargoes could reach the port in the first week of October, another source said.

Similar supply pressure is reported at nearby Khor Fakkan, where all grades remain in short supply.

Brent

The front-month ICE Brent contract has lost by $2.80/bbl on the day, to trade at $105.24/bbl at 17.00 SGT (09.00 GMT) today.

Upward pressure:

Brent’s price has continued to trade above the $105/bbl mark after US President Donald Trump rejected Iran’s peace proposal to reopen the Strait of Hormuz.

“Oil began the session firmer after President Donald Trump rejected Iran’s 7-day proposal,” SPI Asset Management managing partner Stephen Innes wrote.

Subsequently, Iran’s foreign minister Abbas Araghchi said that his country is prepared to reopen the Strait of Hormuz, only if Washington accepts Tehran’s seven-day peace framework.

The latest developments solidify expectations of an extended conflict in the Middle East – enforcing the ongoing bottlenecks for commercial shipping in the Strait of Hormuz.

“[Oil] traders are not pricing an imminent diplomatic breakthrough, but neither are they pricing a permanent closure of the Strait. We remain somewhere in the uncomfortable middle,” Innes said.

Downward pressure:

Money managers and hedge funds have reduced their net-long bets on ICE Brent futures in the week to 22 September.

Speculators sold a little more than 64,500 lots as of 22 September, decreasing net-long positions in Brent futures to over 218,000 lots.

When speculators reduce net-long positions, oil prices tend to decline. Conversely, when they boost these positions, prices typically rise, leading to a cycle where their actions can influence oil prices and the market.  

By Tuhin Roy and Aparupa Mazumder

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