Shippers trying to minimize time in the Middle East after oil tanker attacks pushed up insurance costs are scaling back purchases of marine fuels from the United Arab Emirates’ Fujairah oil hub, trade sources said.
Instead, they are returning to Singapore, the world’s leading fuel distributor, to buy marine fuels, also known as bunkers, with some shortages in smaller bunker ports, including in India and Sri Lanka.
Three sources said that “One ton of high sulfur fuel oil of 380 cents in Fujairah has fallen from an average $ 5- $ 10 over Singapore in May at a discount of $ 30- $ 70 over two weeks last”.
While a Singapore-based merchant based merchant for a commodity trader said, “$ 50 per tonne under Singapore Bargain, if you could cover the risk premium of the war.”
All sources refused to be identified because of company policy.
A range of tanker attacks since May around the Strait of Hormuz and the Gulf of Oman has sent security costs to the threat of war by encouraging shipping operators to reduce the time spent in the region as much as possible.
“There is great evidence that ships are avoiding Fujairah and this is causing growing demand in Singapore,” said the Singapore-based trader.
Shipowners pay annual risk coverage of the war as well as an additional “breach” premium when entering high risk areas. These special premiums are calculated according to the ship’s value, or hull, for a seven-day period.
Ship insurers have cited the rate of offense for 7 days at about 0.35 percent from as much as 0.5 percent two weeks ago. This means additional cost of up to $ 100,000 for a VLCC on a seven-day trip.
A Singapore-based shipping executive said, “This war reward is a nightmare.”
“It’s a case by case, trade with a commercial decision, and there’s no science for it … is just about every trade on its merits and how you handle it accordingly.”
The growing bunker demand in Singapore helped boost Asian oil petroleum market premiums to record last week’s record, with suppliers in the state of the city that are already struggling with stockholding stocks.
Singapore’s oil inventories have fallen since May as HSFO’s clear reserves suppliers before a change in lower sulfur grades under global ship fuel rules that will come into force next year./Investing.com