Singapore expects 1.5 million-1.6 million mt of low-sulfur fuel oil from Western markets in October, down from 1.6 million-1.8 million mt in September, as steeper freight rates have rendered arbitrage flows uneconomical.

Estimates from Singapore-based traders point to a tighter first half of the month, with cargo inflows picking up only in late October and into November.

"The first half of October is definitely looking tight, but we should see some Western cargoes in the second half," one trader said.

The world's largest bunkering hub is leaning on a widening East-West spread to keep barrels moving east.

How wide is the East-West spread?

Platts, part of S&P Global Energy, assessed the spread between Singapore marine fuel 0.5%S cargo and FOB Rotterdam 0.5%S barge assessments at $152/mt on Sept. 29, up from $145/mt on Sept. 28.

The spread has strengthened nearly 17% since mid-September and now sits at its widest level since a record high of $165/mt in March, according to Platts data dating back to April 2022.

"The East-West LSFO [spread] is basically trying to compensate for the freight," another trader said.

Even so, prompt availability of on-specification, finished-grade marine fuel in Singapore could remain tight. Some medium-sulfur blend components from Brazil and the Mediterranean are expected to enter Asia's LSFO blending pool in coming weeks, but traders say that will not fully offset the shortfall.

"I think more and more early-November arrivals are getting fixed right now … Maybe next month will be a tale of two halves," a third trader said. A fourth added: "The first half of November should have more [LSFO] coming."

The Middle East conflict continues to cloud near-term supply fundamentals from the Persian Gulf, according to market sources.

Platts assessed the Singapore marine fuel 0.5%S cargo differential over the Mean of Platts Singapore marine fuel 0.5%S assessment at a premium of $30.33/mt at the Asian close Sept. 29, up from $28.62/mt the previous session, on stronger buying interest for October-loading physical cargoes.

What is happening in Europe?

European very low sulfur fuel oil availability improved in September with arbitrage windows to Singapore and the Americas shut. That window has since reopened eastbound, fueling expectations of tighter supplies in Europe.

Several prompt cargoes have departed Northwest Europe, further reducing spot availability there.

In the Amsterdam-Rotterdam-Antwerp hub, demand was sluggish with limited bunker appetite. Elevated flat prices pushed ARA retail buyers into a wait-and-see approach, delaying purchases unless essential.

Rotterdam VLSFO cracks have collapsed. Platts assessed the front-month marine fuel 0.5%S FOB Rotterdam barge swap against the equivalent Brent swap at minus 52 cents/b on Sept. 29, down from $6.72/b at the beginning of the month.

Traders point to refinery economics as the culprit. "Refineries are running at full speed because of the diesel/gasoil cracks … and coming along with that is a lot of fuel," one European trader said.

Another pointed to feedstock dynamics: "I think feedstock weakness is the main driver behind VLSFO being under pressure." A third linked the weakness to lower low-sulfur straight-run values, noting output from certain primary units running at full capacity in Europe has outpaced demand from secondary units.

For bunkering buyers in Singapore, the message is concrete: tighter prompt supply through mid-October, firmer cargo premiums, and relief contingent on November arrivals already being fixed. Participants said improving outbound arbitrage economics signals emerging supply pressure in the European VLSFO market toward the month-end.