ANALYSIS: The Strange Death of 180 CST Fuel Oil

One of the less remarked-upon casualties of IMO 2020 this year will be the final trickling away of 180 CST high sulfur fuel oil demand.

At one time this less viscous fuel oil grade was the most popular bunker fuel in the world, but by January of this year it represented just 0.02% of total marine fuel demand in Singapore.

But despite that collapse in consumption, there does still appear to be some interest in prices for this grade.

Declining Market Share

180 CST HSFO demand in Singapore dropped to just 700 mt in January, down from 27,000 mt a year earlier and taking up just 0.02% of the total.

The overall collapse in fuel oil demand this year as most shipowners shift to buying very low sulfur fuel oil has not been the main culprit in its decline; interest in this grade has fallen off a cliff in recent years, dropping steadily from 11.76% of Singapore's total demand back in 2005.

180 CST HSFO has not been the most popular grade for several decades now, with 380 CST product having taken over as the refining industry got better at extracting more distillates from its crude oil, and as marine engine improvements left ships capable of burning denser, more viscous fuels.

Improvements in how ship engines cope with heating more viscous fuels were the main reason the shipping industry started to demand the denser products.

The trend didn't stop at 380 CST, with 500 CST and 700 CST grades also steadily gaining market share; 500 CST HSFO demand first overtook 180 CST in Singapore in 2006.

By the mid-2010s, 500 CST and 700 CST product were taking up around half of total fuel oil demand in Northwest Europe.

Pricing Interest

But despite this long-term decline, the majority of which happened decades ago, 180 CST fuel oil has consistently punched above its weight in more recent years when it comes to bunker fuel pricing.

The Mean of Platts Singapore (MOPS) 180 CST assessment produced by price reporting agency S&P Global Platts remained the most significant global fuel oil benchmark long after interest in this grade started to dwindle.

That may have reflected the need to have a cargo price that covered the low-viscosity straight-run product that used to take up a significant share of fuel oil cargoes in Singapore.

More mysterious has been the more recent continuation of interest in 180 CST prices; in the past week Ship & Bunker has heard from three different companies asking whether these prices will continue to be assessed.

It seems unlikely that these readers are seeking to buy this type of oil themselves, so it isn't immediately clear why they need the price for this now-obscure grade, rather than the much more liquid 380 CST price.

It's possible that some contracts around the periphery of the bunker industry have long included 180 CST HSFO as a bunker reference price and have not been updated -- and if so, they should be, as VLSFO is now the dominant bunker fuel.

Even adjusting these contracts just to reflect 380 CST HSFO should not be too complicated, as the 180 CST premium to 380 CST has not been particularly volatile in recent years.

The simple -- if slightly unsatisfactory -- answer to the pricing question is that, as with all grades, we will continue pricing them as long as there appears to be spot demand in the relevant ports. 

In some locations where the local refining set-up means 180 CST is the exclusive HSFO grade, these prices will obviously continue, and in others where 180 CST production has declined to zero, they will end. 

But if anyone can come up with a good reason why these price references should still exist even in the absence of a liquid market, please get in touch.