3 November

Main Headlines

  • Record VLSFO Crack Spreads & High Freight: Singapore VLSFO refining margins surged to multi-year highs near $29–$31/b, while record-wide East-West spreads ($192.50/mt) remained economically blocked by sky-high Suezmax/Aframax dirty tanker freight rates and insurance premiums.
  • ARA Stock Drawdown & Blending Bottlenecks: ARA fuel oil inventories plunged 18.1% week-over-week to 762,000 mt due to stronger local bunkering demand, cutter stock shortages, and persistent Rhine logistical chokepoints.
  • HSFO Strength via Persian Gulf Transit Disruptions: High-sulfur fuel oil cash premiums and time spreads held near multi-month highs on Middle East security risks and Strait of Hormuz transit friction, despite softening South Asian utility burn.

Recent Market Developments: Europe & Singapore Fuel Oil Complex

  • Latest Price Movements & Key Figures:
    • Singapore VLSFO: FOB Singapore Marine Fuel 0.5% M1 paper/swap assessments settled at $835.00/mt on November 2 (down $74.25/mt on the day) after peaking at $909.25/mt on October 30. The physical cash differential over MOPS was assessed at $31.16/mt, while the delivered VLSFO bunker premium over cargo values reached $86.02–$89.03/mt (a ~14% weekly surge).
    • Singapore HSFO: FOB Singapore 380 CST HSFO physical cargoes fell to $775.30/mt on November 2, while its physical cash differential over MOPS 380 CST surged to a premium of $51.22/mt (up 5.3% week-over-week to a multi-month high).
    • Europe (NWE/ARA): FOB Rotterdam 0.5% Marine Fuel barges were assessed at $663.00/mt on November 2. FOB Rotterdam 3.5% Fuel Oil physical barges were assessed at $615.01/mt, with M1 swaps at $585.50/mt. FOB NWE 1.0%S fuel oil cargo M1 swaps dropped to $602.25/mt.
  • Changes in Cracks, Spreads & Cash Differentials:
    • Singapore VLSFO Crack: Front-month Singapore 0.5%S marine fuel refining margins against ICE Brent crude climbed to a four-year high of $29.80/b on October 29 (the strongest since July 2022) and held firm around $30.70/b in early November. The Singapore 0.5%S crack stood at $22.90/b in the October 5 Fuel Oil Market Outlook and has since widened by roughly $8/b.
    • HSFO Refining Margins & Time Spreads: The Singapore 380 CST HSFO crack against Brent held in positive territory around $9.77/b–$10.56/b in late October (having gained ~196% over October). The Singapore 380 CST Nov-Dec M1/M2 swaps backwardation steepened to $61.25/mt on October 30. The Singapore VLSFO Nov-Dec swaps time spread widened to $42.25/mt.
    • Rotterdam Hi-Lo Spread: The FOB Rotterdam VLSFO vs. HSFO (0.5% vs. 3.5%) barge spread widened to $77.50/mt on November 2.
  • Arbitrage Dynamics & Flow Movements:
    • Record East-West Spread: The Singapore Marine Fuel 0.5% vs. FOB Rotterdam 0.5% barge East-West spread expanded to an all-time record high of $192.50/mt on October 29, up 16.5% over two weeks.
    • Closed Western Arbitrage Window: Despite the record price differential, transatlantic and Europe-to-Asia arbitrage remains unworkable on standard Suezmax/Aframax dirty tankers due to prohibitive freight rates and war risk insurance premiums. Traders are resorting to smaller vessels to move select VLSFO parcels from NWE/Med to Asia and the Americas.
    • Declining Inflows to Asia: Western LSFO arbitrage arrivals into Singapore are projected to fall to 1.3 million–1.5 million mt in November (down from 1.6 million–1.7 million mt in October). October fuel oil loadings in Europe for Singapore dropped sharply to 177,000 mt (compared to 682,000 mt in September).
  • Regional Inventory Developments:
    • ARA Fuel Oil Stocks Draw: Commercial fuel oil inventories in the Amsterdam-Rotterdam-Antwerp hub dropped 18.1% week-over-week to 762,000 mt in the week ended October 29 (down from 930,000 mt on October 22), driven by improved local bunkering demand and arbitrage exports.
    • Singapore Onshore Stocks: Onshore heavy distillate stockpiles in Singapore dipped 0.9% week-over-week to a two-week low of 18.68 million barrels in the week ended October 28 (down 18.1% year-over-year), following a temporary import-driven bump to 18.858 million barrels the prior week.
    • Fujairah Residual Stocks: Heavy distillate stocks at Fujairah rebounded to 4.717 million barrels as of October 26 (up 1.035 million barrels or ~28% week-over-week).
  • Physical Market Activity & MOC Execution:
    • Singapore MOC Activity: Physical window discussions saw firm bidding for November-loading VLSFO cargoes, with Vitol bidding MOPS +$32.00/mt to +$33.00/mt and BP offering at MOPS +$31.16/mt. In paper markets, Aramco, DV Trading, Dare, and Axis were active counterparties across 180 CST and 380 CST swaps.
    • European MOC Barges: In NWE, Glencore offered 0.5% Marine Fuel barges at $681.00–$685.00/mt, while BP offered at $695.00/mt. Total and Shell entered bids in the $685.00–$690.00/mt range.
  • Refinery Operations, Blending Constraints & Logistics:
    • Blending Cutter Shortages: European blenders face severe prompt shortages and exorbitant costs for viscosity cutters, light shale components, and blendstocks in ARA, driving physical VLSFO cash differentials into the low-to-mid $20s/mt range. Low Sulfur Straight Run (LSSR) remains abundantly available in NWE, leading blenders to redirect LSSR into the VLSFO bunker pool.
    • Rhine River Bottlenecks: Water levels at the Kaub chokepoint averaged a depressed 14 cm in October, severely curtailing inland barge transport and stranding products at coastal ARA ports. Rail substitution remains restricted by the total closure of Germany’s right-bank Middle Rhine Line for overhaul until December 12.
    • Persian Gulf & Strait of Hormuz Disruptions: Ongoing attacks on commercial tankers in the Strait of Hormuz and Houthi strikes on Saudi energy infrastructure have elevated global shipping and logistics costs to over 30% of a crude barrel’s price (vs. ~5% pre-conflict). Persian Gulf crude shut-ins are estimated by the US EIA at 4.47 million b/d for Q4 2026.

Outlook (Next 2–3 Weeks)

  • Market Direction & Primary Drivers: Low-sulfur marine fuel (VLSFO) refining margins will remain structurally supported near multi-year highs ($28–$30+/b cracks) across both European and Asian hubs, driven by acute blending cutter shortages, low ARA coastal inventories, and depressed Western arbitrage arrivals into Singapore. High-sulfur fuel oil (HSFO) will maintain a tight structural floor owing to Persian Gulf transit risks, though post-summer utility demand deceleration in South Asia could gradually release heavy barrels back to the market. The October 21 European Gasoil Market Outlook had described ARA middle distillate inventories as 20% below the five-year average at 2.255 million mt, and low coastal stock cover has since extended to fuel oil, with ARA stocks at 762,000 mt.
  • Arbitrage Viability & Trade Flow Shifts: The West-to-East and transatlantic arbitrage windows will remain functionally constrained by elevated Aframax/Suezmax dirty tanker freight rates and war risk insurance premiums. Shippers will continue using smaller vessel parcels (MRs/Handysizes) to bypass Suezmax freight friction, keeping Western arbitrage arrivals in Singapore capped at 1.3M–1.5M mt in November and forcing Asian buyers to rely heavily on regional finished-grade stocks.

Disclaimer

This insight reflects Alkagesta’s views on historical developments and potential future trends in energy markets, demand, and supply dynamics. The analysis is based on Alkagesta’s internal assessments and publicly available information from a variety of external sources. Certain numerical data referenced in this insight is derived from or informed by information published by S&P Global Platts, including the Platts Long-Term Oil Demand Outlook.

This insight may contain forward-looking statements, including projections, expectations, estimates, and assumptions regarding future developments. Actual outcomes may differ materially from those expressed or implied due to a range of factors beyond Alkagesta’s control, including changes in economic conditions, technological developments, regulatory or policy changes, geopolitical events, shifts in energy demand and supply, or other market developments.

The information provided is for general informational purposes only. While Alkagesta believes the information is derived from reliable sources, no representation or warranty is made regarding its accuracy or completeness. Alkagesta assumes no obligation to update or revise any statements or information contained herein.

Any reference to or use of information contained in this insight should be accompanied by an appropriate citation of Alkagesta Market Insights and a link to the original publication.

Newer
Alkagesta featured in international press following the acquisition of Energy Petrol
Back to list
Older Alkagesta participates in IPEC 2026 in Zhoushan