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Hi-Low sulphur spreads surge as the IMO 2020 countdown begins


Spread between high-low sulphur fuel oil has widened sharply in recent weeks as preparations ahead of the January 1 deadline gathered pace.
 
The price differential between 0.5% and 3.5% sulphur fuel oil for Jan-20 contracts in Singapore surged by 21% since the beginning of the month, rising from $208 per tonne on August 30 to $251 per tonne today. Rotterdam prices saw similar gains, with the hi-low spread for the same contracts rising by 27%, from $202 per tonne to $256 per tonne during the same period.
 
The Jan-20 contract spreads fluctuated within the $170-$190 per tonne range for most of this year.

Rising demand for cleaner fuels is also reflected in refinery margins. Singapore crack spreads for gasoil surged to their highest levels for September in six years. Margins could push even higher as the recent attack on Saudi Arabian oil facilities could tighten supplies in Asia in the coming weeks.
 
While the switch to clean fuels is widening spreads and lifting refinery margins, tight supply of heavy fuel oil in Singapore is pushing spot prices higher. The cash premium for 380cst HSFO cargoes soared to a record high of $61.6 per tonne above Singapore quotes earlier this week.
 
Spot availability of HSFO is tight as traders are not shipping cargoes to the region as the market is in steep backwardation. Supplies might get even tighter in the coming days as exports from Saudi Arabia are expected to drop on the back of the attacks last weekend.
 
The cash premiums are expected to drop in coming months, however, as the industry completes its switch to clean fuels. Currently, Jan-20 contract for 380 HSFO in Singapore is trading at $257 per tonne. That compares to $540 per tonne* in Singapore.


 
Source:Arrow

The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.

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