Bunker Prices Pressured-Scrubber differential deflates heavily with the East leading the declines

Asian refineries ramping up utilization and a tightness in VGO and residual fuel oil volumes are triggering diverging trends in bunker price benchmarks. While VLSFO prices tracked the decline in oil prices closely last week, HSFO prices were more resilient with a notable divergence in Singapore HSFO prices which moved countertrend, registering weekly gains.

Singapore HSFO prices increased +1.2% w-o-w, while those of VLSFO declined by -7.7% squeezing the VLSFO-HSFO differential below $200/ton, down by approx. -$60/ton w-o-w.  In Rotterdam, both benchmarks declined, with VLSFO down by -7.3% w-ow and HSFO down -5.0% resulting in a scrubber premium of approx. $160/ton, down from $184/ton last week. While the pace of the declines is deeper in Singapore, both Singapore and Rotterdam spreads are currently trading approx. $20/ton below the same period last year.

However, as we discussed in last week’s Newsletter, we believe that the middle distillates supply tightness is not past its peak yet, and thus it is still early to call this downward trend as one that is here to stay.