Bunker fuel prices in South Korea are likely to ease this month on rising supplies, ending a bullish run that boosted prices for about a month, market participants said this week.
“All four refineries [in South Korea] have plenty of stock now, so prices have been coming down,” a trader said Friday.
The decline followed a period of tight bunker fuel supplies in South Korea during April, which saw most of the local refiners affected to varying degrees.
At the time, market participants said previous strong demand for bunker fuel had led some refiners to oversell the product.
In addition, vessel delays for replenishment cargoes, as well as market talk that one of the refiners had sold around three medium range cargoes of fuel oil to China, had further tightened availability of bunker fuel in South Korea.
The supply shortage lifted 380 CST bunker fuel for delivery in South Korea to a near five-month high of $255/mt on April 29, Platts data showed. The South Korean 380 CST bunker fuel was last assessed higher on November 25, 2015, at $256.50/mt.
In addition, the tight supply also caused the spread between South Korea 380 CST bunker fuel assessments and the Mean of Platts Singapore 380 CST high sulfur fuel oil assessments to hit a three-month high of $35.66/mt on April 26.
As South Korea imports cargoes from Singapore, South Korean market participants generally watch the spread as a measure of local market strength.
But South Korean-based traders said this week the situation has now changed, with some saying the ramp-up in prices over April had hit demand.
“We lost demand, as buyers had gone to other ports in other countries,” a source said this week.
Agreeing, another trader said: “Demand in the last two weeks has been slow, but I believe it should be coming back to normal soon because in May, we have good enough availabilities as all the refineries are back to normal supplies, so prices should be softening,” he said.
At the Asian close Thursday, the spread between South Korea 380 CST bunker fuel assessments and MOPS 380 CST high sulfur fuel oil assessments had eased to $25.87/mt, down $5.89/mt from the previous day.
“I think the spread between South Korea [380 CST bunker fuel] and MOPS [380 CST high sulfur fuel oil assessments] will be maintained at around $20-25/mt,” a trader said Friday.
“It’s definitely better now than this time last year when the spread was horrible, when it was like $12-13/mt,” the source said, adding that returning demand for South Korea should hopefully see the spread supported in the $20-25/mt range.
Source: PlattsPrevious Next