Low sulfur fuel oil storage available for lease at Zhoushan, China’s largest bunkering hub, stood at 1.98 million cu m as of Dec. 5, easing 4.76% from November but jumped 68.68% higher year on year, according to Zhejiang Mercantile Exchange data. Local refineries imported more fuel in December in hopes of stronger buying activities at the end of year.
In October, low sulfur fuel oil storage surged to 2.21 million cu m, reaching an all-time high due to steadily depleting stockpiles in Zhoushan.
However, buying activity has reportedly fallen short of stronger expectations due to tepid bunker demand around the bunkering hub of Zhoushan.
Market participants had drawn down on their limited LSFO export quotas towards the end of the year amid initial expectations of substantial import appetite for the China market. However, buying activity has remained subdued due to tepid bunker demand around the north Asian bunker hub of Zhoushan.
With current bunker demand largely still sluggish, supply will likely remain sufficient until the end of the year despite the smaller-than-anticipated 1 million mt of fuel oil export quotas released for LSFO in September.
China has allocated a total of 13 million mt of export quotas for LSFO so far, down 1.29% year over year.
Weaker-than-expected import appetite from China due to sluggish bunker demand in Zhoushan had also potentially led to some barrels being trapped around the Singapore hub.
“We are seeing high LSFO inflows for these months, there’s a lot of Meleck crude in the market, but also a lack of medium-sulfur [fuel oil] too,” a Singapore-based fuel oil trader, citing ample feedstock components for the 0.5% marine fuel blending pool.
Some traders hoping to offer medium-sulfur fuel oil to China in November said there was “no demand for components”.
With the supply overhang in both Zhoushan and Singapore, S&P Global Commodity Insights data showed that the price spread between Zhoushan-delivered marine fuel 0.5% bunker and the same delivered grade in Singapore widened to $17.62/mt in November, from $14.28/mt in October. The spread was last assessed at $28/mt on Dec. 4, Commodity Insights data showed.
Overall tank utilization rates at Zhoushan narrowed by 0.61 percentage points on the month to 41.73% as of Dec. 5, with 8.572 million cu m of storage available for lease out of a total capacity of 14.710 million cu m, according to the ZME data.
Crude oil storage availability fell 3.46% month on month but surged 144.74% higher year on year at 2.79 million cu m in December, having peaked in September since ZME data became publicly available in May 2022.
Apart from crude and LSFO, storage availability for gasoline fell on the month, while that of diesel rose on the month in December.
Meanwhile, storage availability of naphtha and jet fuel remained unchanged from November.
Source: Platts
