Bunkering

Weekly bunker price differential report launches

With the sulphur cap just 131 days away, Ishaan Hemnani from online platform BunkerEx launches a weekly column today looking at fuel price differentials.

With 0.5% fuel oil swaps still lacking liquidity, extrapolating 0.5% fuel oil premiums today up the curve makes it look very expensive (only $3-13 under gasoil as shown in the table below).

It seems in reality that 0.5% fuel oil is anchoring off the more liquid 3.5% fuel oil or gasoil, pricing approximately $30-40 under gasoil and $200 above 3.5% FO. However as the gasoil 0.1% to HFO 3.5% spread (GoFo) widens in 2020 by $60, both cannot be satisfied:

3.5% FO plus $200 = gasoil minus $90/mt in Q1 2020
or
Gasoil minus $30 = 3.5% FO plus $260 in Q1 2020

There is an argument for both, as whilst owners with scrubbers will be looking at the 0.5% versus 3.5% fuel oil differential, the rest of the market can only lift 0.5% fuel oil or MGO. Perhaps it ends up as some blend of the two quotes (current physical indications suggests that would be 19% 3.5% FO and 81% MGO).

Looking at more immediate concerns for shipowners, physical premiums in Singapore continue to be very strong (+$56) as supply of HSFO continues to deplete whilst demand stays steady. As we approach Q4 this might only get worse as barges and tanks are cleaned in preparation for 0.5% fuel oil, and shipowners will still want to burn 3.5% fuel oil at $200 cheaper until they absolutely have to switch.

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Ishaan Hemnani

Ishaan Hemnani is the CEO of online platform, BunkerEx. Prior to founding the bunker broking company in 2017 he was a trader with World Fuel Services. Ishaan will be writing a weekly column for Splash on bunker price differentials as the global sulphur cap kicks in.

Comments

  1. The cash prices for 0.5% in the U.S. remain very strong, Ishaan. I agree it is startling, but there is something to it for each of Argus and Platts to strongly so assess each day in each of the pricing basins here.

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