If HSFO premiums are meant to get cheaper due to a drop in demand, we’re not seeing it yet. Physical premiums in Singapore were extremely strong at +$114 over November paper last week. Tight availability of HSFO is not unique to Singapore with the same story reported at major bunker hubs across the globe.
This once again makes the hi5 differential to VLSFO look cheap at just +$169 in the spot market, and VLSFO -$42 under MGO. Quick tip: for today’s levels, save +44 118 310 0466 in your phone as ‘BunkerEx’, open WhatsApp and send a port, e.g. ‘Singapore’ (our bot will reply with the latest prices).
We can’t help but feel the moment of reckoning will come soon in the great scrubber debate. Rumours swirl of HSFO suppliers pricing at extortionate levels because, well, what other choice does a ship with a scrubber have? If that’s the case, expect the hi5 to narrow significantly throughout 2020.
On the other hand we’ve heard of HSFO contracts going at ‘reasonable’ levels throughout 2020, so it will be fascinating to see what takes place as the year unfolds.
Implied levels of VLSFO in Q1 2020 using the spot blend margin of 20/80 HSFO/MGO gives a physical hi5 of +$256 and -$64 under MGO. However, if current VLSFO physical premiums (+$50) are maintained it makes VLSFO +$30 higher (+$286 over HSFO and just $34 under MGO).
In other news, oil prices rose in the past week as US crude stocks fell from refineries running more crude. However, any price increases seem to be in the shadow of weak growth forecasts leading to lower oil demand.