23-11-2016

Hong Kong bunker price soars to near 16-month high on tight supply, firm demand

Bunker

The Hong Kong bunker fuel price for delivered 380 CST kicked off the week on a strong note, surging $28.50/mt from Friday to hit almost a 16-month high of $312/mt at the Asian close Monday.

The gain of $28.50/mt was the steepest seen in more than five years, with S&P Global Platts historical data showing that the Hong Kong bunker fuel market last saw a steeper day-on-day rise on November 8, 2011, when the assessed 380 CST delivered price for Hong Kong rose $28.75/mt.

While some of the upward price support seen Monday was due to the product tracking day-on-day gains in crude, traders said the extra push was fueled by a shortage of supply as well as firm demand for the 380 CST grade.

“The Hong Kong [bunker fuel] market is tight, especially the spot market,” a trader said late Monday, adding that while some suppliers will have fresh volumes arriving into Hong Kong over the next few days, those volumes have already been sold to buyers.

“Even when the new cargo arrives, I think the situation will be pretty much the same as the volumes are committed to term customers already,” the source said.

Market participants said the main companies that bring volumes into Hong Kong are Chimbusco Pan Nation, Sinopec Hong Kong Fuel Oil and Chevron, with these three companies also having access to terminal and storage facilities.

An industry source close to the matter said Tuesday morning that replenishment volumes for Sinopec Hong Kong Fuel Oil would arrive soon, with other market sources estimating that the fuel would arrive Tuesday or Wednesday.

“There should be all three grades available in the shipment,” the industry source said Tuesday morning, referring to 380 CST, 180 CST and 500 CST bunker fuel. While volumes being brought in could not be ascertained, the source said a large portion of the shipment has already been sold to both term and spot customers.

“But there is another shipment arriving at the end of November or around December,” the source said, adding that he was not sure of the exact delivery schedule as yet.

Traders said bunker fuel in Hong Kong has been selling out quickly this month due to a combination of more volumes being lifted by term customers as well as firm spot demand.

Platts reported earlier in November that pre-nomination volumes from term customers for the month had been unexpectedly strong, which worked to siphon off available volumes from the spot market.

“Even though crude prices are up, demand for Hong Kong will not be impacted by high [bunker] prices … November is always busy,” a trader said Monday.

“November is the ‘high’ season because of more vessels moving around for the holiday season,” he said.

The Platts Market On Close assessment process Monday saw rapid trading activity, with Chimbusco Pan Nation, the sole buyer, steadily increasing its bid through the process even as Chuangxin, the sole seller, retreated on its offer price, with three trades eventually concluded by the end of the MOC.

Apart from Hong Kong, strong gains were recorded for 380 CST delivered bunker fuel across all other Platts assessed ports on Monday, although the gains for Hong Kong far outpaced those ports.

At the Asian close Monday, 380 CST delivered bunker fuel for South Korea, Japan and Shanghai were assessed at $316.50/mt, $308.50/mt and $305.50/mt, respectively. Single-day gains across these three ports ranged from $11-$13.50/mt.

Still, some traders said this week that the Hong Kong market was not as tight as it seemed to be.

“There doesn’t seem to be any tightness for Hong Kong, not at the moment,” a trader said Monday, adding that the situation “seems to be OK for now.”

Another trader agreed on late Monday, saying: “The [Hong Kong] market is not tight at all — there were price levels being heard in the $285-$290/mt range for 380 CST delivery from November 26 onwards,” he said. Trade or counterparty details at these levels, however, could not be confirmed at the time.

Source: Platts 

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