Singapore Fuel Oil Traders Return to Onshore Storage in Jan Amid Lower Fees
01.07.2019 - NEWS

January 7, 2019 [S&P Global Platts] - Singapore fuel oil traders have returned to utilizing onshore storage in January amid a protracted fall in leasing fees, after largely exiting the sector in early 2018, market sources said this week.

Vitol, Trafigura and Sinopec Hong Kong have leased tanks at Universal Terminal from January, while Repsol has leased the tanks at Tankstore, market sources said.

A Trafigura official said the company had no comment on the matter, while officials at Vitol, Sinopec Hong Kong and Repsol did not respond to S&P Global Platts’ inquiries by time of publication.

Fuel oil traders largely gave up landed storage tanks in the first half of 2018 because of high costs and low bunker premiums.

BP Singapore exited landed fuel oil terminals at end December 2017, while Glencore gave up its storage at Helios terminal at end April last year.

Repsol also terminated its storage lease contract at Tankstore at end April, and Vitol Singapore its tank storage lease for fuel oil at Oiltanking Seraya in Singapore at end June.

The fees for onshore tanks were $5-$6/mt a month in 2017, market sources said. As more tank storage were emptied, the fees dropped to $3-$3.50/mt a month around mid-2018, fuel oil traders in Singapore said.

They have returned to landed tanks with a new budget [in 2019] as they think the fees will not go below $3/mt, as tank operators kept them rather empty [instead of lowering fees],” a Singapore-based trader said.

Rising Bunker Premiums Add Impetus

A rise in bunker premiums in H2 2018 has also prompted traders to return to landed storage, market sources said.

Bunker premiums had remained weak through to H1 2018, when Singapore 380 CST ex-wharf bunker premiums averaged $2.23/mt to the Mean of Platts Singapore 380 CST high sulfur fuel oil assessments, down from $2.86/mt in 2017, Platts data showed.

However, premiums spiked after Singapore faced specification issues over July-August, prompting shipping companies to pay higher premiums to secure material they were confident was not contaminated, industry sources said.

Spot supply tightness over October-November further contributed to the rise in bunker premiums.

Traders in H2 2018 were also preparing for the International Maritime Organization’s global fuel sulfur cap on marine fuels falling to 0.5% from 3.5% at the start of 2020, a a second source at a tank operator.

Landed tanks are easier for blending fuel oil; blenders can use more pipelines,” the source added.

Weakening backwardation has also encouraged traders to return to landed tank storage in recent weeks, market sources said.

The 380 CST December/January timespread averaged $10.62/mt in November, and fell to $4.33/mt in December, Platts data showed. The spread was assessed at $3.15/mt Wednesday.

The backwardation of $3-$4/mt a month is not so bad [for storing fuel],” said a fuel oil trader based in Singapore.

The traders taking landed storage were typically planning to lease tanks for three to six months due to the current uncertainty in the market, sources said.

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