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Market Reporting
ConsultingEvents
Argus Delivered Bunkers InitiativeThe Singapore perspective
Sammy SixMarine Fuels Pricing AnalystTokyo Bunker Forum22 Nov 2018
Agenda
2
2 Position of Singapore in the global bunker market
3 IMO 2020: impact on marine fuel demand and trade flows
4 Quality, availability and compatibility issues
5 Singapore as an LNG bunkering hub
6 Argus Delivered Bunkers Initiative
1 About Argus
7 How to price 0.5% MFO?
Argus - one of the largest and fastest growing commodity PRA and information providers
Early Stage Indexation Breakthrough Commercialisation and Expansion2 3 4
Today: 2nd largest PRA
160+ publications
23,000+ price assessments
Over 3,5004 core clients
Further 3,000 Metal Prices
clients
Approaching 900
employees
21 offices in trading hubs
Note: selected illustrative data. 1: Liquid Petroleum Gas. 2: All Publishers Index.3: Argus Sour Crude Index.5: As of FY 2015. Includes editorial and business development. 6: Revenues based on the audited accounts .
Founded in 1970
1970: EuropOil Prices newsletter
Foundation1
M&ANew market entryInnovation Indexation and Benchmark
1984: Crude and European Products
1985: Asia Pacific Products
1986: US Products 1993: LPG1
1995: Gas 1998: Asphalt
2000: Launch of Argus Online
1984 - 2000 2010 - 20152000 - 20101970 - 1984 Today
0.4 1.2 2.2 5.3 6.4
9.9 11.1 15.4
23.5
41.9
56.1
72.0
90.7
107.8
124.4
1984 1988 1992 1998 2000 2002 2004 2006 2008 2010 2011 2012 2013 2014 2015Houston, Singapore (1985), Moscow
(1994)Houston, Singapore (1985), Moscow
(1994)Washington (2000), Tokyo (2005), Dubai (2009
)Washington (2000), Tokyo (2005), Dubai (2009
) NY (2011), Calgary (2012), Rio (2013)Selected officesopened:
Entry into Fertilizers (2011), Petrochemicals (2012) and Metals (2014) markets
2013: Russian Federal Tax Service
2014: Crude on ASCI Ecuador
2015: Argus Open Markets
2015: Argus Spot Ticker
TABrewerConsulting
Revenue, £m6
2013: Argus Direct
2003: Joint launch of API2 coal with IHS McCloskey
2003: European gasoline
2005: US Crude
2008: Biofuels Europe
2010: Saudi, Kuwaiti and Iraqi crude indexation to ASCI3
2000: Coal, Transportation, Emissions
2001: Petroleum Coke 2005: LNG 2008: Bioenergy, Jet Fuel 2009: Biomass 2010: Base Oil
1979: The Argus Telex
2016GA invests in Argus –
valuing business at over $1 billion
Our leadership & strength in core high value markets is a measure of our success…US Crude – Market Leader
USGC Products – Market Leader
Fertilisers – Market Leader
Global LPG – Market Leader
European Gasoline – Market Leader
Euro Biofuels – Market Leader
CIS – Crude and products market leader
Global Coal – Market Leader
Bio Mass – Market Leader
Singapore’s location and infrastructure are key
5
Source: EIA
• Singapore lays in the mouth of the Strait of Malacca, the world’s second busiest oil trade chokepoint after Hormuz
• Connects Indian Ocean with Pacific Ocean, shortest vessel route between West/Mideast and Asia-Pacific
• World-class port infrastructure• Still, deep waters and no piracy• Stable and transparent government• Multitude of suppliers, competitive
pricing• 4mn t sales per month, 125 bunker
operations per day
Singapore Bunker Sales
6
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
Annual bunker sales per port (t)
Source: variousYear: latest data available
• Left: Singapore accounts for 25% of the global bunker market, est. at 200 million tonnes• Right: Around 90% of Singapore marine fuel sales are high-sulfur 3.5% fuel oil
Source: Singapore MPA
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Monthly MFO sales by quality (000 t)
HSFO 380cst HSFO 500cst (LS)MGO Others
IMO 2020 will change the composition of the global bunker pool
7
0
50
100
150
200
Bunker Demand Scrubber Non-Compliance Compliant fuel MGO
Bunker Fuel Substitute (million T)
Source: Argus Consulting
LSFO
MGO
Hybrids
Trade Flow Shift: West-East fuel oil arb to largely disappear
0
50
Supply Demand
mt
0
50
Supply Demand
mt
0
50
Supply Demand
mt0
50
Supply Demand
mt
0
50
Supply Demand
mt
0
50
Supply Demand
mt
0
50
Supply Demand
mt
0
20
40
60
80
Supply Demand
mt
Trade Flow
Bunkering Hub
0
Supply (2016)
Demand (2016)
Key import sources SG• Russia• Mideast Gulf• US• Brazil
Source: Argus Consulting
Changes in blending components may result in alternative global trade flow pattern…
Trade Flow
Bunkering Hub
0
100
200
300
Supply Demand
mt
0
100
200
300
Supply Demand
mt
0
100
200
300
Supply Demand
mt0
100
200
300
Supply Demand
mt
0
100
200
300
Supply Demand
mt
0
100
200
300
Supply Demand
mt
0
100
200
300
Supply Demand
mt
0
100
200
300
Supply Demand
mt
0
Supply (2016)
Demand (2016)
Asia will become balanced in gasoil, and supply will largely remain in the region• China• Korea• India Source: Argus Consulting
Argus Marine Fuels Outlook
10
• Quarterly analytical report ahead of IMO 2020
• Contains price forecasts & news and analysis
• Covers Asia, Europe and Americas
• Scrubber database
• Next issue to be released 9 Jan 2019
MFO bunker sales dipped throughout the year…
11
Sales declining over the summer because of high prices, contamination fears and FO cargo tightness…
2.5
3
3.5
4
4.5
5
FO arbitrage inflow (mn t)
Arbitrage inflows from the west of Suez fell from 3Q onwards, usually 4-4.5 mn t
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
MFO sales Singapore (1000 t)
2017 2018
Delivered premiums over HS 380cst cargo price through the roof
12
0
5
10
15
20
25
30
35
40
16 Nov 2017 16 Jan 2018 16 Mar 2018 16 May 2018 16 Jul 2018 16 Sep 2018 16 Nov 2018
HS 380cst delivered bunker premium ($/t)
• Dislocation between delivered and cargo…• Different quantities (500-3kt vs 20kt) and laycans (4-12 days vs 15-30 days)• Different market dynamics (delivered local, cargo depending on regional arbitrage)
Quality, availability and compatibility issues
13
• Due to introduction of MFM in 2017, no longer quantity or ”cappuccino” disputes • Quality issues still prevalent though: “bad bunkers” contamination crisis 2018• Reinforces question marks come 2020 regarding:
- Quality of blends- Availability of compliant fuels- Compatibility
• Only a couple of majors have announced fuels and availability, full specs by end-2018?• Fuels will be sold against existing ISO:8217 specs, maybe update from ISO in 2019?• Expectation: owners will opt for existing low-sulfur gasoil bunkers during first months,
then change to cheaper blends• High quality blend components reserved for 0.5%... HSFO quality to suffer even more?• Competition for Singapore expected mainly from Ningbo-Zhoushan
Singapore as an LNG bunkering hub
14
LNG bunker barge by FueLNG (JV Shell/Keppel). Operational by
end-2020
• Singapore has ambition to become future Asian LNG trading hub • LNG as compliant marine fuel: clean (no NOx/SOx and less CO2), viable and scalable • LNG bunkering: need for LNG bunker vessels, now still truck-to-ship (MPA subsidies)• Port Focus Group: solve chicken-and-egg problem and coordinate global infrastructure• 9/10 largest bunkering ports already offer LNG
Vancouver
RotterdamAntwerpZeebrugge
MarseilleYokohamaUlsan
Ningbo-Zhoushan
Singapore
Argus Delivered Bunker Initiative: why Singapore? and why now?
15
Argus Delivered Bunker Initiative: A three-phased approach
16
1 2 3Build robust assessments Obtain indexation Launch derivatives
• IMO 2020: industry needs to change benchmarks
• Need for fair and accurate deliveredbenchmarks instead of premiums to cargo
• MFMs: sharp pricing
• LSFO 0.5%S for now based on 7:1 ratio
• Allows for hedging
• Clear need for exchange cleared swaps settling on Argus assessments
• Creation of eco-system
0
5
10
15
20
25
Jun Jul Aug Sep Oct Nov
Reported daily bunker deals (Avg)
380cst LSMGO
0
10
20
30
40
11-Jun-18 11-Jul-18 10-Aug-18 9-Sep-18 9-Oct-18 8-Nov-18
Total companies submitting (cumulative)
Assessment based on Volume Weighted Averaging of deals
17
Deals must be received by 7pm Singapore time to be included
18
Deals are preferred by email to [email protected] can be submitted by any reasonable means including phone, skype, ICE chat, text, WhatsApp etc.
Deal information is treated as strictly confidential. Only the quantity of deals and the assessed price are published.
Comparison of Argus and Platts assessment process for Singapore bunkers
19
‘Market On Close’ methodology.
From Bunkerwire report on website:“For Singapore delivered 380 CST bunker fuel,
a bid stood at $450/mt against offers at $466/mt during the Platts Singapore MOC
assessment process. Out in the market, offers were mostly between $462-$465/mt.”
$461.50
No transaction data, wide price range, based on survey, data does not explain assessment.
Volume Weighted Averaging of transactions that meet the standard specifications of laycan and quantity reported by 7pm Singapore time.
Seven (7) 380cst deals reported that day, totaling 5,640t.
In October 2018 an average of Thirteen (13) 380cst deals per day were reported.
$464.40
Precise assessment, based on actual transactions, high quality
data inputs, mathematical process.
Assessment Method
Example:3rd August
Assessed value
Argus Platts
IMO2020 compliant assessment ‘LSFO 0.5%S’ – launched by Argus October 1st
20
Now, for the first time, there is a 0.5%S assessment with a name and specifications
that can be referenced and hedged in contracts that extend beyond Jan 2020.
Prior to aligning with the ‘standard’ methodology shown here when deals
become available, the assessment will be based on a 7:1 blending ratio of LSMGO
0.1%S and HSFO 380cst.
No market consensus on pricing levels of 0.5%S bunkers…
21
HSFO 3.5%
LSMGO 0.1%
Price indications from majors likely below market value because test cargoes
Argus 7:1 ratio(placeholder)
$150/t range
Argus in pole position to assess the bunker markets come 2020!
22
02468
1012141618
Daily assessment contributors
380cst total contributors LSMGO total contributors
24
8
• Once physical 0.5% bunker market develops, we’ll hear about prices first• The Argus Delivered Bunker price in Singapore is by far the most robust and qualitative
assessment in the market, accurately reflecting value in the world’s largest bunker hub!
05,000
10,00015,00020,00025,00030,00035,00040,00045,00050,000
Total quantity reported (t)
HALF of total spot market
Participants by type
Suppliers Owners
34%66%