Fuel Oil Becomes Asia’s Next Cost Shock
Dips Into Strategic Oil Reserve Again Amid Supply Disruptions Norway could hold significant undiscovered… Natalia Katona is a freelance commodity analyst, based in the United Arab Emirates.
Singapore’s shipping-fuel market is adding another layer of cost to Asian trade.
Disrupted supplies from the Middle East and Russia, resilient bunker demand and prohibitive freight rates have pushed high-sulphur fuel oil above the price of the crude used to produce it.
Seasonal relief from Gulf producers and additional Chinese export allowances could ease the squeeze towards year-end, particularly for very-low-sulphur fuel oil.
But with replacement cargoes expensive to transport and Russian supplies vulnerable to further disruption, a return to pre-war pricing relationships looks harder to achieve.
For shippers, the sharpest move has been in high-sulphur fuel oil, or HSFO.
Singapore’s November crack against Dubai crude soared above $10/bbl in mid-October, compared with a discount of around $5/bbl in February (i.e.
That represents a reversal of more than $15/bbl for a product normally worth less than its crude feedstock.
It also means higher bunker costs reflect more than rising oilprices: fuel oil itself has become unusually expensive.
The regional disproportion in the global fuel oil market is equally striking.
The Singapore–Rotterdam HSFO swap spread was at a record $95/t on October 7 (equivalent to approximately $15/bbl), before it eased to $88/t.
With the European HSFO crack lingering around -$10/bbl to Brent and the US Gulf Coast crack falling below -$20/bbl, Singapore’s geographical premium illustrates how heavily the shortage is concentrated in the Asian market.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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