Singapore Bunker Prices Under Pressure from Flood of Russian Fuel Oil

The influx of Russian oil is said to be putting pressure on prices in Singapore

Singapore fuel oil stocks Friday were said to be at a two-year high as imports of Russian fuel oil have trebled, Reuters reports.

According to the report, sales to Asia have increased dramatically as residual fuel demand in Europe has dropped following new sulfur regulations for bunkers.

Singapore's fuel oil imports from Russia alone are said to have trebled year-on-year to 4 million tonnes during quarter 1 (Q1) 2015.

In addition, falling crude prices are understood to have aided refiners' margins and boosted output of products, including fuel oil, meaning supply has increased.

These dynamics are said to be putting downward pressure on bunker prices in Singapore, working against a 10 percent rally this month.

"Rotterdam should logically be absorbing less Russian fuel oil due to weaker bunker (marine) fuel oil demand in Northwest Europe," said Andrew Reed, principal at U.S.-based energy consultancy, ESAI.

"That could be causing some of Russia's exports to be diverted from Northwest Europe to Singapore."

According to the report, demand for bunkers in Singapore grew 5 percent in Q1 2015 but Chinese demand dropped 20 percent, meaning even more product is looking for a home in Singapore.

The influx of fuel oil to Singapore is said to have been so large that some traders are blending higher grades of fuel oil with lower grades.

"The straight-run market is terrible, so a lot of that is ending up in the cracked bunker pool," said one Singapore-based trader.

Earlier this month, Keppel Offshore & Marine's Managing Director said the Singapore shipping industry will need to invest in research and development if it is to be ready for a rise in the price of bunkers.