VLCCs predicted to be out of favour transporting fuel oil post-sulphur cap

Fuel oil in the sulphur cap era will increasingly move away from VLCCs, according to the latest weekly report from Alphatanker, part of AXS Marine, while in the run up to the new legislation Singapore, the world’s top bunkering hub, is seeing less fuel oil being delivered from Europe.

“The most apparent change in fuel oil trading patterns has been that less cargoes have left Europe bound for Singapore over recent months and according to market information, fixtures are likely to slump further over the coming months,” Alphatanker noted.

Singapore is the world’s largest bunker hub, where marine fuel demand totals around 0.97m barrels per day, with 380 cst on its own accounting for 660,000 barrels per day. While Alphatanker projects the Southeast Asian republic to remain the world’s largest bunker hub post-2020, the marine fuel demand profile will change significantly as marine gasoil and blended 0.5% hybrid products (VLSFO) become the most widely consumed products.

“Bearing in mind the aforementioned stock draws in the territory, it appears that bunker market participants are already running down inventory as they anticipate the shift in the marine demand mix. For this reason, we anticipate that VLCCs loading fuel oil in Rotterdam will become much rarer going forwards,” Alphatanker predicted.

According to Alphatanker data, although Singapore accounted for 32% of European fuel oil exports (not including European destinations) in 2017, this had slumped to only 10% by 2018 as flows diversified. This trend Alphatanker expects to intensify post-2020 as fuel oil use diversifies.

Globally, Alphatanker is predicting there will be a movement away from VLCCs for the transport of fuel oil.

“If there will be more intra-regional trade at the expense of long haul trade, this suggests that Aframaxes and Panamaxes will take demand away from larger vessels. However, if India and China do become significant destinations for Atlantic Basin-produced fuel oil, then the volumes and distances involved will favour Suezmaxes,” analysts at Alphatanker wrote in their most recent weekly report.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
Back to top button