The Middle East supply shock has now reached the world's largest bunkering hub. File Image / Pixabay

The world's largest bunkering hub is already showing signs of stress as supplies reduce in the wake of the worsening conflict in the Middle East.

Singapore trading sources speaking to Ship & Bunker on Friday described a market fraught with tension, concerned over what appears to be an imminent shortage of supplies for this market.

Producers are reported to be cutting back on deliveries to suppliers, and suppliers cutting back on working with traders.

VLSFO delivered in Singapore stood at $677/mt on Thursday, according to Ship & Bunker prices, up by $174/mt since the end of last week and the highest level since November 2023. Singapore's VLSFO premium to Rotterdam was $80/mt on Thursday, up from $33/mt at the end of last week and the widest spread since September 2024.

"Prices are shooting up by like $100-150/mt every day for all grades," one source said.

"LSMGO avails are looking like they will become very tight soon, due to the halt on diesel production.

"Some physical suppliers are also holding back from selling, in the hope of securing a higher selling price as the situation worsens."

Analytics firm Spotbarge, which tracks bunkering activity through AIS data and other sources, observed 210 bunker deliveries in Singapore on Thursday, down from 247 on Wednesday and compared to the usual daily average of about 240 operations.

The Asian market has been particularly sensitive to the supply shock from the Middle East because of its refineries' reliance on crude and refined products from the region.

The US has given Indian refineries a month-long reprieve to use Russian crude from floating storage in a bid to ease market pressure, and China has asked its refiners to stop exporting refined products - a move which is likely to hit the Singapore bunker market.

Bunker suppliers in Singapore are resisting attempts from buyers to secure supplies through new term contracts, a trading source said.

"Physical suppliers are not offering for contracts even for a minimum of three months out," the source said.

"You can imagine customers would want to take decisive actions now to secure bunkers ASAP for at least Q2 to Q3, seeing the situation, so they sent out bunker tenders to us.

"But physical suppliers are mostly not too keen on offering these tenders from our customers.

"From what I know, suppliers here are still not showing any signs of not being able to fulfil existing contracts, but they're definitely not taking on new tenders."

Singapore's residual fuel stocks gained 1% to 22.6 million bl (about 3.4 million mt) last week. If all of that product were sold in Singapore rather than exported or used in other industries, it would be enough to cover about 22 days of typical Singapore bunker demand, taking the average from 2025.

"It's about the balances; even if Hormuz opens, it will take time to get inventories up," a source said.

"People are just not realising this, and thinking that it's too big and will not happen.

"Guess what, it's happening so far.

"If Hormuz stays closed this weekend then Monday will be a different world in bunkers."