The Singapore 0.5% sulfur marine fuel and 380 CST high sulfur fuel oil cargo spread hit a year-to-date high of $237.64/mt on Monday, having more than doubled since market participants stepped up preparations to transition to low sulfur fuels in October, S&P Global Platts data showed.
The impending implementation of the International Maritime Organization’s 0.5% sulfur cap rule for marine fuels from January 2020, has caused demand to shift to the low sulfur fuel oil segment.
The Singapore Marine Fuel 0.5% cargo versus FOB Singapore 380 CST HSFO cargo spread shot up $12.86/mt or 5.72% day on day, to a year to-date high of $237.64/mt on Monday, Platts data showed.
The spread had first breached the $100/mt mark on September 24, from which it rose to $115.27/mt on September 30, Platts data showed. The spread has now doubled since, as trading interest for the Marine Fuel 0.5% product had ballooned in October.
The fourth-quarter is when most shipowners had begun their supply contracts for low sulfur marine fuel, and while an increasing number of ships have begun loading or partially loading IMO 2020-compliant fuel, many shipowners were reportedly trying to delay their shift to using LSFO as late in December as possible due to the higher cost of the low sulfur marine fuel, trade sources said.
Shipping sources said vessels would have to debunker any HSFO left in the bunker tank and wash the tanks to prevent contamination of the low sulfur bunker fuel.
The widening spread between Singapore Marine Fuel 0.5% and FOB Singapore 380 CST HSFO cargo is evident from the monthly expansion. The spread averaged at $82.78/mt in September, averaged at $175.27/mt in October, and the month to-date average for November is $205.14/mt, Platts data showed.
Reflecting the shift in bunker demand from high sulfur fuel to low sulfur fuel, the price spread between the two grades has also widened over H2 2019.
The delivered bunker price spread between MF 0.5% and 380 CST high sulfur bunker fuel averaged $166.41/mt so far in Q4, widening 85% compared with $89.85/mt in Q3, Platts data showed.