Fujairah's Hi5 spread widens as VLSFO remains scarce

• Fujairah's Hi5 spread widens by $84/mt in September
• VLSFO imports into Fujairah resume after six-month halt
• Singapore and Zhoushan spreads narrow on HSFO tightness

Fujairah's Hi5 spread has widened sharply this month, pulling away from Singapore and Zhoushan, as the limited fuel oil cargoes reaching the UAE port have been mostly HSFO.

The spread between VLSFO and HSFO in Fujairah has widened from $201/mt on 1 September to $285/mt on Thursday, according to ENGINE's daily average prices. It peaked at $307/mt on 20 September, it's widest since 1 July. The spread has averaged $244/mt so far this month, up from $184/mt in August.

Fujairah's VLSFO price has climbed by $163/mt this month to $1,006/mt. Its HSFO price has gained only $79/mt, to $721/mt.

In Singapore and Zhoushan, by contrast, HSFO prices have risen at least as fast as VLSFO prices. Singapore's Hi5 spread has narrowed from $207/mt on 6 September to $164/mt. Zhoushan's spread has fallen from $217/mt on 2 September to $140/mt. Fujairah's spread is now $121/mt wider than Singapore's and $145/mt wider than Zhoushan's.

A wider Hi5 spread increases fuel cost savings for scrubber-fitted ships burning HSFO instead of VLSFO.

Imports still far below pre-war levels

Fuel oil imports into Fujairah have fallen steeply this year, according to cargo tracking firm Vortexa. They slumped from 305,000 b/d in January and 218,000 b/d in February to just 14,000 b/d in March following the outbreak of the Middle East conflict, before falling to zero in April. In August, they averaged just 30,000 b/d.

Imports have picked up to 126,000 b/d so far this month, but this remains less than half the January level. High-sulphur fuel oil accounts for 80% of September’s arrivals, with low-sulphur fuel oil making up the remaining 20%.

This is the first VLSFO to reach Fujairah since February, Vortexa data shows. No VLSFO arrived between March and August. In January, VLSFO made up 34% of the port's imports.

The recent arrivals have started to lift inventories. Fujairah's fuel oil stocks nearly doubled to 5.60 million bbls in the week to 21 September, from 2.84 million bbls a week earlier, according to Fujairah Oil Industry Zone (FOIZ) data published by S&P Global. Stocks have averaged 4.69 million bbls this month, up 19% from August, but remain well below the 10 million bbls held in January.

The stock build has not brought the VLSFO price down. Fujairah's VLSFO price reached a monthly high of $1,014/mt on 20 September, and the spread has stayed above $280/mt since 19 September.

Supply of all major bunker grades in Fujairah remains "super tight", a Middle East-based source said. Availability is also limited at nearby Khor Fakkan, as US-Iran tensions continue to disrupt shipping through the Strait of Hormuz.

HSFO tightness squeezes Asian spreads

Singapore's spread narrowed in mid-September as HSFO supply came under pressure. Recommended HSFO lead times in Singapore stretched to 10-19 days in the week to 15 September, from 10-12 days a week earlier. They have since eased to 9-12 days.

VLSFO supply remains tight in Singapore, with lead times of 13-17 days. Most suppliers are holding low stocks, and cargo delays linked to the Middle East conflict are adding to the pressure, a Singapore-based source said.

Zhoushan's HSFO price is now the highest of the three hubs. It climbed by $63/mt between 22 and 24 September to $812/mt, which is $85/mt above Singapore's HSFO price and $91/mt above Fujairah's.

Bunkering at Zhoushan's outer anchorages resumed on 16 September after a 22-day suspension caused by typhoon-related bad weather. VLSFO lead times in the port remain around 10 days, as several suppliers are running low on stocks, a source said.

Bunkering activity is expected to be muted at several Chinese ports during the Mid-Autumn Festival from 25-27 September.

By Tuhin Roy

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