Fujairah's Hi5 spread has blown out to $285/mt, widening $84/mt in three weeks and pulling far ahead of Singapore and Zhoushan as scarce fuel oil cargoes reaching the UAE port arrive overwhelmingly as high-sulphur product.

The spread between very low sulphur fuel oil and HSFO at Fujairah widened from $201/mt on 1 September to $285/mt on Thursday, according to ENGINE's daily average prices. It peaked at $307/mt on 20 September — the widest level since 1 July. The spread has averaged $244/mt so far this month, up from $184/mt in August.

The divergence is stark. Fujairah's VLSFO price has climbed $163/mt this month to $1,006/mt, while its HSFO price has gained only $79/mt, to $721/mt. In Singapore and Zhoushan, by contrast, HSFO prices have risen at least as fast as VLSFO prices. Singapore's Hi5 spread narrowed from $207/mt on 6 September to $164/mt, and Zhoushan's fell from $217/mt on 2 September to $140/mt. Fujairah's spread now sits $121/mt wider than Singapore's and $145/mt wider than Zhoushan's.

For shipowners, the arithmetic is straightforward: a wider Hi5 spread increases fuel cost savings for scrubber-fitted vessels burning HSFO instead of VLSFO. Fujairah has effectively become the most attractive of the three hubs for scrubber-equipped tonnage, while non-scrubbed ships calling at the UAE port face the region's steepest compliant-fuel bill.

Imports still far below pre-war levels

The price dislocation traces back to a supply collapse. Fuel oil imports into Fujairah slumped from 305,000 b/d in January and 218,000 b/d in February to just 14,000 b/d in March, following the outbreak of the Middle East conflict, before falling to zero in April, according to cargo tracking firm Vortexa. August arrivals averaged only 30,000 b/d.

Imports have recovered to 126,000 b/d so far this month — but that remains less than half the January level. The composition is the problem for VLSFO buyers: HSFO accounts for 80% of September's arrivals, with low-sulphur product making up the remaining 20%.

Those VLSFO parcels are the first to reach Fujairah since February. Vortexa's data shows no VLSFO arrived between March and August. In January, VLSFO represented 34% of the port's imports.

The recent arrivals have started to rebuild inventories. Fujairah's fuel oil stocks nearly doubled to 5.60 million bbls in the week to 21 September, from 2.84 million bbls a week earlier, according to Fujairah Oil Industry Zone (FOIZ) data published by S&P Global. Stocks have averaged 4.69 million bbls this month, up 19% from August — but still well below the 10 million bbls held in January.

The stock build has done nothing to soften VLSFO prices. Fujairah's VLSFO price reached a monthly high of $1,014/mt on 20 September, and the Hi5 spread has held above $280/mt since 19 September.

Supply of all major bunker grades in Fujairah remains "super tight", a Middle East-based source said. Availability is also limited at nearby Khor Fakkan, as US-Iran tensions continue to disrupt shipping through the Strait of Hormuz.

HSFO tightness squeezes Asian spreads

Singapore's spread narrowed in mid-September as HSFO supply came under its own pressure. Recommended HSFO lead times in the port stretched to 10-19 days in the week to 15 September, from 10-12 days a week earlier. They have since eased to 9-12 days. VLSFO supply remains tight, with lead times of 13-17 days. Most suppliers are holding low stocks, and cargo delays linked to the Middle East conflict are adding to the pressure, a Singapore-based source said.

Zhoushan's HSFO price is now the highest of the three hubs. It climbed $63/mt between 22 and 24 September to $812/mt — $85/mt above Singapore's HSFO price and $91/mt above Fujairah's. Bunkering at Zhoushan's outer anchorages resumed on 16 September after a 22-day suspension caused by typhoon-related bad weather. VLSFO lead times in the port remain around 10 days, as several suppliers run low on stocks, a source said.

Bunkering activity is expected to be muted at several Chinese ports during the Mid-Autumn Festival from 25-27 September.

With VLSFO arrivals at Fujairah still running at a fraction of pre-conflict volumes and Hormuz disruptions persisting, the port's Hi5 spread looks set to stay wide until low-sulphur cargo flows return to anything near their January share of imports.