November 18, 2023 [Reuters]- Global energy trader Gunvor (GGL.UL) is exiting fuel oil storage at the PetroSeraya terminal in the Asian oil hub of Singapore, with a Sinopec unit set to take over the space, several market sources told Reuters.
The Geneva-based trader’s exit comes after more than a decade of storing fuel oil at the terminal on Pulau Seraya, part of Singapore’s Jurong island oil and chemicals hub. Onshore oil storage space in Singapore is limited and is often viewed as a strategic asset for companies and their trading activities.
Gunvor still holds fuel oil storage tanks at the Jurong Port Universal Terminal site although it was not immediately clear if the trading house would renew its lease there, which will likely expire by the end of the year, the sources said.
The company may instead charter tankers to store fuel oil, which provides more flexibility at lower costs, the sources added.
A spokesperson for Gunvor Group declined to comment. PetroSeraya and Jurong Port Universal did not respond to requests for comment.
Sinopec Fuel Oil Singapore, a unit of Asia’s largest refiner, state-run Sinopec (600028.SS), will gradually take over the fuel oil tanks Gunvor is vacating, which can hold about 600,000 cubic metres of fuel, the sources said.
Sinopec Fuel Oil has been expanding its fuel oil cargo and bunker trading volumes this year after receiving a bunker licence to sell ship fuel from Singapore’s port authority last year.
Sinopec did not respond to a request for comment.
Storage fees to lease onshore tanks in Singapore reached S$7 ($5.15) per cubic metre in November for new contracts, about $1 more than floating storage, according to the sources.
Gunvor’s move occurs against a backdrop of steepening backwardation in the fuel oil market structure. Spot prices are higher than those in later months in a backwardated market, which means the value of oil held in storage declines over time and deters traders from holding too much oil in their tanks.
The prompt monthly spread for very low sulphur fuel oil between November and December hit $34.50 in early November, its widest backwardation in more than a year, LSEG data showed. The spread remained above $30 a metric ton on Wednesday.
Fuel oil volumes stored in Singapore onshore tanks were at 19.44 million barrels in the week to Nov. 1, compared to weekly average volumes of 20.94 million barrels in 2022, Enterprise Singapore data showed.
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