Asia/Pacific News
Traders: Singapore Set for a Bunker Price War, Market is Flooded with Oil
Bunker prices in Singapore are set to fall, with traders reported to be looking for a quick sell after the country's fuel oil inventory hit its highest level in over 15 years, Reuters reports.
"The market is flooded with oil and everyone is desperate to sell quickly, so you have a price war," a Singapore-based trader told Reuters.
Bunkers, which typically pay a premium over the cost of larger cargoes to account for logistics costs, reportedly flipped to a discount from early June.
After hitting a discount of as much as $5.38 a tonne last week, 380-cst is said to have traded at a discount of $1.95 a tonne below the prices of large cargoes on Monday.
The retreat in marine fuel prices has reportedly been spurred on by a glut of product at refineries and commercial oil tanks in Singapore that have combined inventories of over 27 million barrels, the highest since 1999.
The situation is said to be exacerbated by strong oil processing margins, which have spurred western refineries to increase output and push excess oil to Asia.
"Would-be sellers are also worried that the record volumes of intra-Singapore fuel oil trades due to load from the second-half of June will worsen port congestion," said Reuters.
Over 4 million tonnes of both the 180-cst and 380-cst, a record volume, has reportedly been traded in Platts' market on close (MOC) price assessment process since the beginning of June.
Some traders have reportedly turned to selling ex-wharf oil in 2,000 to 5,000 tonne parcels.
"The cargo berths are going to be congested but people will still want to move the oil out," said a Singapore-based trader.
"Selling ex-wharf is one way (of doing that)."
However, the longer term price outlook is said to be more positive as traders report that underlying demand remains strong and lower supplies into Asia are expected for July.
Meanwhile, swap prices are said to indicate a possible recovery into September.
Last week it was reported that Singapore bunker volumes hit a 13 month high.
