Bunker fuel prices across ports in Asia, Middle East tumble

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…Hit fresh 5.5 year lows

Bunker fuel prices across key ports in Asia and the Middle East have hit five-and-a-half-year lows, on the back of crude’s continuing decline and weak demand in some of the ports, Platts data showed this week.

The outright price of Singapore 380 CST ex-wharf bunker fuel fell to its lowest level in 67 months, at $348.50/mt Friday, according to Platts data.

The last time it was lower was on May 18, 2009 when the outright price was assessed by Platts at $340/mt.

Day on day, the grade fell by $12.75/mt, and it has become a familiar scene this week, with prices dropping by $10/mt on average each day, tracking the descent of crude prices.

Demand, despite the low prices, continued to be thin, with buyers saying they were also seeing weak demand from shipowners to whom they would resell the fuel to on a delivered basis.

Buyers also believed the market to be bearish and that prices had not hit the floor just yet, according to trade sources in Singapore Friday.

While the market saw demand fall drastically and credit terms tighten severely in the immediate days after the collapse of OW Bunker, the situation on the credit front has taken a turn for the better, trade sources said.

The bunker supplier filed for bankruptcy protection on November 7, after announcing a loss of at least $275 million due to a combination of fraud and mark-to-market losses.

The market reacted by cutting off open credit terms completely and switching to Letters of Credit (as guaranteed by banks) or dealing on cash terms, said trade sources. But after more than a month of very tight credit terms, the market is now slowly returning to trading on open credit terms, said one seller.

Hopefully this return to open credit will buoy buyers’ interest, trade sources said.

“Everyone needs to sell,” especially with demand having been so poor so far this week, said one Singapore-based trade source.

NORTH ASIA RESPONDING TO LOW PRICES

Prices also fell to fresh lows in the North Asia market, though buyers in these ports were responding to the low prices, unlike those in Singapore, said trade sources in the region Friday.

Traders in North Asia maintained that demand for bunker fuel has improved in November and December, typically the peak demand season in Asia, with the low prices a strong motivation for buyers.

The Hong Kong 380 CST delivered bunker fuel grade was assessed at $365.50/mt, $7/mt lower day-on-day and 10% lower on week. The last time it was lower was May 18, 2009, when it was assessed at $347/mt, Platts data showed.

380 CST delivered bunker fuel in Japan was assessed at $394.50/mt Friday; it was last assessed lower on May 28, 2009 at $383.50/mt. And South Korea 380 CST was assessed at $402.50/mt, down $4/mt on the day and it’s lowest level since May 29, 2009’s $392.50/mt.

The fresh 5.5 year lows were largely attributed to weak crude sentiment, which Citi Future analyst Timothy Evans said was likely a reflection of the market “anticipating some further downward revision to the demand outlook” in the International Energy Agency report later Friday. in the event, the Paris-based agency made a new set of bearish oil market forecasts in its latest monthly report, slashing its estimate for global oil demand growth in 2015 (see story at 1009 GMT).

FUJAIRAH PRICES ALSO AT FRESH LOW

In Fujairah, the outright price of the 380 CST grade on a delivered basis also hit a more than five year low at $359.50/mt on Friday.

The last time it was lower than this was on May 26, 2009, when the outright price was at $353/mt in the key port for bunkering in the Middle East.

Conditions in the Fujairah market were slightly different, with some congestion in barging schedules, and some sellers unable to deliver prior to December 20, which explained why there was some support for prices in the port.

With prices now about $11/mt higher than Singapore, Fujairah’s main competitor for bunkering, sellers would be keen to sell what they can now before buying interest deviates back to Singapore, trade sources said.

Source: Platts

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