In this issue of the Weekly Market Report, we have three sections: crude oil and geopolitics, diesel and gasoil (MGO) and bunker fuel markets.
Note: Deadline for text and charts: Monday, Oct 26th.
New York sees steady contract demand, with distillate availability tightening. Fujairah remains well supplied with short notice periods, while ARA faces tighter VLSFO and HSFO availability. Storm-related disruptions are affecting operations in Skaw.
New York
Contract demand remains steadily strong and is expected to continue through the fourth quarter. Spot demand has been relatively muted, although intermittent buying interest continues to emerge. Meanwhile, distillate availability is showing signs of tightening.
ARA
B100 continues to be more attractive than MGO in the Netherlands. VLSFO and HSFO availability is slightly tight, with longer lead times, while MGO remains stable.
Fujairah
The Middle East region continues to see daily vessel attacks but bunkering across ports remains smooth and operational.
Bunker availability for all grades is currently good although barge capacity has reduced significantly in recent months meaning the supply/demand dynamics can shift quickly from one week to the next. Ensure at least 7 days lead time for bunker orders.
Panama
7 to 10 days lead time.
Tokyo
Product availability remains very tight for November. Market participants are also closely monitoring the trajectory of Typhoon IN-FA, which could disrupt operations from this weekend into early next week.
Zhoushan
HSFO and VLSFO availability remains tight.
Hong Kong
VLSFO availability remains normal, although suppliers continue to offer selectively, generally focusing on smaller enquiries of less than 500 MT. A premium is typically applied to larger stems above 1,000 MT.
Seoul
Tight availability for VLSFO & HSFO. HSFO only offer case by case. 2 out of 4 suppliers out of October VLSFO stock already.
Durban
Only duty-paid MGO is available in Durban.
Skaw
Storm across the region at the moment so backlogged well into the week.
Malta
Supply conditions have started to ease following a 72-hour port closure. Prompt deliveries are now available, although at a premium. However, a lead time of at least one week is still recommended to ensure access to the full range of supplier options.
For port availability and demand, download the full report here.
Despite renewed diplomatic efforts, we maintain our higher-for-longer oil price outlook. The risk of further escalation in the Middle East remains substantial, particularly around the US midterm elections on 3 November.
Brent currently trades at USD 116.2/bbl, close to six-month highs. Prices have eased from recent peaks amid renewed hopes of diplomacy, but the geopolitical risk premium remains elevated.
The most important weekend development was President Trump's statement that he is approaching a decision between reaching an agreement with Iran and launching renewed military attacks. Additional US military assets have been deployed to the region, while Iran has warned of retaliation. Meanwhile, Saudi Arabia, Turkey and Pakistan held high-level talks with Iranian officials in Tehran on Monday to explore de-escalation. The diplomatic initiative is encouraging, but a breakthrough remains uncertain.
The Saudi-Houthi confrontation remains particularly concerning. Over the weekend, missile and drone attacks continued against Saudi Arabia. On Monday, the Houthis claimed fresh attacks on pumping stations along Saudi Arabia's crucial East-West oil pipeline and on Riyadh airport. The pipeline attacks have not been independently confirmed. The East-West pipeline is particularly important because it allows Saudi crude to bypass the Strait of Hormuz. Damage could undermine one of the market's most important alternative export routes.
Although Middle Eastern crude exports have recovered significantly, the combination of shipping disruptions, high tanker freight rates and insurance costs means that physical market conditions remain far from normal. This is also reflected in the Dated Brent, which was assessed at USD 128.3/bbl on Monday. We have also seen cal-27 prices move higher again, with Brent trading at USD 96.7/bbl and gas oil at USD 1,156/MT. That said, there is still a significant backwardation, notably in the gas oil/MGO curves.
We expect tensions to remain elevated ahead of the US midterms and potentially intensify afterwards. Even a diplomatic agreement would not immediately restore damaged infrastructure, refinery capacity or depleted inventories. Our higher-for-longer outlook therefore remains intact. For consumers, we favour high hedge ratios over the next three to six months, while keeping hedge duration below benchmark and using price corrections to add to hedges and fix prices.
Our view remains that US efforts to reduce diesel prices will have limited impact on global prices. However, new evidence of increasing Russian refinery production is a positive supply development that deserves attention.
European diesel prices remain exceptionally high. ULSD 10ppm CIF NWE currently trades at USD 1,496/MT, up 146.5% year-to-date, while ICE gasoil remains around USD 1,500/MT. High refining margins continue to reflect the shortage of middle distillates, particularly following disruptions to Middle Eastern exports.
Reuters reported on Monday that Russian diesel production is increasing following the US-Russia supply agreement. Output reportedly recovered from approximately 160,000 tonnes per day in early October towards 180,000 tonnes after export quotas were granted. This could make more than 1 million tonnes per month available for export, although some volumes are needed by neighbouring countries. The first 40,000-tonne cargo is heading towards New York. This is a genuine improvement, but actual additional exports will depend on refinery operations and Russian export restrictions.
Other US measures remain modest. The proposed release of 315,000 barrels from the Northeast Home Heating Oil Reserve provides only temporary relief. The IEA's planned accelerated release of more than 20 million barrels of diesel is more significant, but cannot substitute for sustained refinery production. The latest US crude reserve exchange of 400,000 barrels addresses a local refinery disruption rather than the global diesel shortage.
Inventory data offered some relief last week. US distillate stocks increased by 1.7 million barrels to 104.3 million barrels, but remain 9% below their five-year average. ARA gasoil inventories have also improved, averaging 13.33 million barrels in October, 6% above September. However, global diesel inventories remain vulnerable to further supply interruptions and increasing winter demand.
We maintain our view that diesel, gasoil and MGO prices will remain elevated. Consumers should favour high hedge ratios over the next three to six months, while retaining flexibility on longer-dated hedges. Purchased call options remain attractive for consumers concerned about geopolitical price spikes but wanting exposure to potential price declines. Contact your local Dan-Bunkering sales contact if you want to know more about alternatives to traditional fixed-price agreements.
HSFO tightness remains the dominant feature of the Singapore bunker market. The exceptionally narrow HI5 spread and wide East-West price differential illustrate how regional supply disruptions and expensive tanker freight continue to fragment the global fuel oil market.
Singapore's HI5 spread recovered from its recent extreme lows of around USD 27/MT but remains exceptionally narrow at approximately USD 60/MT on Monday. The main driver is continued HSFO strength rather than VLSFO weakness. This continues to reduce the fuel-cost advantage for scrubber-fitted vessels.Note the charts below are based on prices in the paper markets.
Inventories underline the regional imbalance. Singapore's fuel oil stocks have averaged 18.52 million barrels in October, 6% below September, despite increased net imports. HSFO supply remains particularly tight, with recommended delivery lead times of 12–21 days, compared with 14–21 days for VLSFO.
Rotterdam remains relatively better supplied. ARA fuel oil inventories have averaged 5.85 million barrels in October, 7% above September. However, prompt availability is still constrained, and bunker buyers are advised to allow 5–7 days for delivery.
The Singapore-Rotterdam HSFO East-West spread remains exceptionally wide. Under normal circumstances, this would encourage arbitrage flows from Europe to Asia. However, elevated tanker freight rates, limited vessel availability and higher insurance costs continue to restrict movements, allowing substantial regional price differences to persist.
We see potential for the Singapore HI5 spread to recover further as supplies gradually improve, although persistent HSFO tightness could limit that recovery. MGO remains exposed to the wider global diesel shortage.
For bunker buyers, regional price differences, fuel quality and delivery availability remain as important as outright crude oil prices. We therefore continue to recommend managing VLSFO, HSFO and MGO exposures separately, with particular attention to regional basis risk.
