Prospects for the low sulfur bunker fuel markets across Asia are getting brighter with analysts projecting that the current momentum would run through the first quarter of this 2020 after the International Maritime Organisation’s (IMO) 0.5% sulfur mandate kicked in on January 1.

Insiders say a rapid shift in demand towards cleaner fuels in the last quarter of 2019 boosted low sulfur bunker premiums significantly in December, flipping spot differentials from discount to premium at some major bunkering ports in Asia.

Singapore’s spot delivered marine fuel 0.5% differential to Mean of Platts 10 ppm gasoil assessment averaged at a premium of $23/mt in December versus a discount of $28/mt in November, S&P Global Platts data showed. The differential stood at a premium of $76/mt on December 31, the data showed.

While market sources are expecting the upward momentum to continue into Q1 amid steadily robust demand and tight prompt barging availability, recent ex-wharf offers for the first quarter and January-loading term contracts have also surged in line with delivered market sentiment, Singapore-based sources said.

A Singapore-based fuel oil said earlier this week, “I will offer at above plus $60/mt levels [over 10 pmm gasoil] if it’s for January term; delivered is strong so there is no reason to sell ex-wharf cheap.”

Platts earlier reported that prices have surged from December-loading ex-wharf term levels, which were at discounts in the range of $50-$55/mt to MOPS 10 ppm. But, most sellers were opting for delivered rather than ex-wharf sales due to stronger delivered margins.

According to a Singapore-based bunker trader, “Suppliers are telling me that they prefer to just offer in the spot market… expecting the uptrend to continue into March.”

In the mean time, Singapore’s bunker price spreading to North Asian ports have also narrowed significantly in recent weeks, though prices in both regions climbed in December. Delivered marine fuel 0.5% prices in Shanghai, which were $55/mt higher than in Singapore at the start of 2019’s last quarter, had crunched to $5/mt on December 31.

Furthermore, the Shanghai delivered marine fuel 0.5% spread to the Singapore delivered marine fuel 0.5% averaged $7/mt in December, narrowing from $17/mt in November. Shanghai prices even dipped below Singapore for the first time on December 4, at minus $4/mt, Platts data showed.

Shanghai prices marine fuel 0.5% prices had averaged $20/mt higher than Singapore’s between the launch of assessments on July 1 and December 31.

“If the Singapore price continues to be so expensive then we will switch to other ports — in fact we were already taking more at Shanghai on some days in December”, a Singapore-based source from a shipowner told Platts.

A major China-based supplier however, said “a bunch of ships [from a Chinese company] that couldn’t take delivery in Singapore are coming to Shanghai to fulfill their requirements, and due to the contract we have with them, we have to supply them as a priority, thus we have no more offers for the rest of the market.”

Spot offers in the region have thinned, with several suppliers in the region facing the same cargo tightness. “As Singapore is tight, there is a lull in cargo imports into South Korea. Refiners have maximized production but it is still tight”, a bunker trader for the South Korean market said.

Similarly in Hong Kong, suppliers noted that buyers are now fixing orders earlier than usual to secure supply. “We have only limited cargo for spot inquiries”, a bunker supplier based in Hong Kong said.

Most sources expected there will not be enough LSFO supply to cater to bunker demand across Asia in the first quarter unless China started exporting in the near future.

The supply deficit will prompt some shipowners to take marine gasoil if they could not secure enough LSFO, market sources said.

“I think Q1 will still be quite supported [for LSFO]… if there’s any kind of easing, it will be in February… I think what’s going to happen next is that gasoil will become very expensive”, a major bunker supplier in Singapore said.

Adding, the supplier said, “ultimately, Singapore will be the epicenter that people have to come back to if the neighboring ports are not doing well [in securing supply]. There’s a lot of strain on Singapore to fulfill the requirements for LSFO.”

Traders are however, expecting Singapore to receive only two million-2.5 million mt/month of LSFO in this first quarter due to limited supply from other parts of the world, Platts reported earlier.

Singapore is the largest bunkering hub in the world, with monthly bunker demand averaging four million mt/month in 2019, according to data from Singapore’s Maritime and Port Authority.