Fuel Switch Snapshot: Bio-blends at a hefty price tag

Higher Brent drives VLSFO prices higher

Rotterdam's LNG back at a discount to VLSFO

Bio-blends now much costlier than LNG

CHART: The dots represent bunker fuel prices adjusted for calorific contents to become VLSFO-equivalents, and with various estimated levels of EU ETS costs excluded (Rotterdam) and included (Rotterdam to non-EU port and Rotterdam to EU port). ENGINE, PRIMA Markets, NYMEX

VLSFO benchmarks in Rotterdam and Singapore have jumped by $19/mt and $16/mt, respectively, over the past week. A rise in front-month ICE Brent futures has supported VLSFO values upwards.

Rotterdam's sharp VLSFO price rise has taken the grade from a $13/mt discount to LNG to a $6/mt premium now.

When we include estimated EU Allowance (EUA) costs for voyages between two EU ports, LNG is now $12/mt cheaper than VLSFO in Rotterdam.

Rotterdam’s B24-VLSFO premium over LNG has gone up by $21/mt in the past week, to $180/mt. B24-VLSFO is $170-175/mt costlier than LNG when we add estimated EUA costs to bunker fuel prices, which penalise biofuel blends slightly less than LNG.

This means that fossil LNG is a much cheaper alternative to B24-VLSFO blends for ships with dual-fuel engines bunkering in Rotterdam. And this is true even when we include the estimated costs of complying with the EU ETS regulation.

HSFO remains the most affordable option for scrubber-fitted ships.

VLSFO

Brent futures rose above $87/bbl on Friday, supported by mounting tensions between Israel and Hezbollah and concerns that global oil supplies could be disrupted by a broader conflict in the Middle East.

This increase appears to have boosted Singapore and Rotterdam's VLSFO prices.

Availability of the grade in Rotterdam remains normal. It has improved a bit in Singapore, with suppliers indicating lead times of 4-9 days, compared with 7-17 days the week prior.

Biofuels

Biofuel bunker blend prices in Rotterdam and other ARA ports are up by $20-21/mt with support from rising values for both conventional (+$19-20/mt) and bio (+$23/mt) components.

The price of B30-VLSFO UCOME ARA has risen in tandem with that of B30-VLSFO HBE Rotterdam in the past week, and the UCOME blend is still unattractive at a $67/mt premium over the rebated HBE price.

UCOME-based B24-VLSFO is the go-to biofuel bunker grade in Gibraltar and Algeciras, and it has risen by $19/mt in the past week. That widens its premium over Singapore’s equivalent grade to $67/mt.

Singapore's $13/mt gain for B24-VLSFO outcompetes its B24-LSMGO grade but is still far off the price gains we have seen in the ARA in the past week.

A B24-VLSFO deal was reported in Singapore on Monday at $729/mt, or $8/mt below the benchmark from Friday. No further details of the stem’s size or lead time are known, but it was priced considerably lower than another indication of $745/mt in the market.

LNG

Rotterdam’s VLSFO-equivalent LNG bunker price has remained unchanged at $568/mt in the past week. The bunker price reflects a slight drop in the front-month NYMEX Dutch TTF Natural Gas benchmark, indicating stability in the European gas market.

The price has inched lower by just $1/mt when we take estimated EUA costs into account.

Meanwhile, Singapore’s LNG bunker price has increased by $7/mt in the past week.

A surge in demand across key Asian gas markets can tighten LNG supply, causing suppliers to prioritise deliveries to these high-demand destinations. This can in turn curb availability of LNG for bunkering in Singapore and exert upward pressure on prices.  

By Konica Bhatt

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