Fuel Switch Snapshot: Conventional fuel prices surge but remain at discounts

Brent spike pushes conventional fuels higher

HSFO and VLSFO supply tight in major bunker ports

CHART: The dots represent bunker fuel prices adjusted for calorific contents to become VLSFO-equivalents, and with various estimated levels of EU ETS costs in 2024 excluded (Rotterdam) and included (Rotterdam to non-EU port and Rotterdam to EU port). ENGINE, PRIMA Markets, NYMEX

The front-month ICE Brent futures contract has surged $6.07/bbl ($44/mt) higher over the past week. Conventional fuels are feeling the push, with VLSFO and HSFO prices in Rotterdam and Singapore rising dramatically in response.

Tight supply of the grades at these ports has only added fuel to the fire.

This dramatic rise in conventional fuel prices has also pushed the respective bio-blends in both of these ports sharply higher.

Meanwhile, Rotterdam’s LNG bunker price has soared $36/mt higher without estimated EU Allowance (EUA) costs added, and $29-33/mt with EUAs.

Despite VLSFO and LSMGO price increases in Rotterdam and Singapore in the past week, they remain cheaper than LNG in both ports. HSFO is still a favourable alternative for scrubber-fitted ships.

VLSFO

Rotterdam's HSFO has surged by $83/mt over the past week, while its VLSFO has seen a smaller rise of $33/mt. This upward movements have mainly been driven by a significant increase in the Brent price, and tight HSFO supply in the port.

Product loading delays in the ARA have kept both HSFO and VLSFO supplies under pressure, a trader said.

Singapore’s HSFO price has jumped by $39/mt and its VLSFO has gained $36/mt over the past week.

Prompt VLSFO availability remains tight in Singapore due to low stock levels and ongoing terminal loading delays faced by some suppliers, a trader said. Several suppliers are now advising lead times of over two weeks for VLSFO. HSFO supply is also under pressure, with lead times extending to up to two weeks.

Biofuels

Rotterdam’s B24-VLSFO HBE price has jumped by $54/mt in the past week, while its B24-LSMGO HBE price has risen by an even more significant $64/mt.

PRIMA Market’s palm oil mill effluent methyl ester (POMEME) CIF ARA price has gone up by a massive $115/mt to $1,421/mt. Volatility in the global crude oil market amid tensions in the Middle Market has supported price gains for used cooking oil methyl ester (UCOME) and POMEME in the ARA hub, PRIMA commented.

Both biofuel benchmarks in Singapore have shot up in the past week, with the port’s B24-VLSFO UCOME price climbing by $29/mt and the B24-LSMGO UCOME price rising by a greater $33/mt. These gains have been bolstered by a $36/mt rise in the underlying ENGINE conventional VLSFO price and a $41/mt increase in the LSMGO price.

LNG

Rotterdam’s VLSFO-equivalent LNG bunker price has risen by $36/mt in the past week. The port’s LNG bunker price has tracked an upward movement in the front-month Dutch TTF Natural Gas contract.

Supply risks from the escalating Middle East conflict are driving up European gas prices. A potential Israeli retaliation against Iran could threaten crude oil and LNG shipments through the Strait of Hormuz, a crucial route for about 20% of global LNG trade, primarily from Qatar, according to ING's Warren Patterson.

Qatar supplied nearly 10% of the EU's LNG imports in the first half of this year, according to the Institute for Energy Economics and Financial Analysis.

Singapore’s LNG bunker price has remained mostly steady, with only a $5/mt decline in the past week. Weak spot demand in Asian markets is weighing on the region’s underlying LNG benchmark, according to Kpler. 

By Konica Bhatt

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