Singapore's Fuel Oil Surge: A 18-Week High and What It Means for Energy Markets

The fuel oil market in Singapore has reached a critical inflection point. Onshore inventories hit a 18-week high of 22.9 million barrels (3.6 million metric tons) as of April 16, 2025, marking the highest level in 17 weeks and underscoring a supply-driven market imbalance. This surge, fueled by record imports and weakening demand, has significant implications for global energy investors.

The Drivers: A Perfect Storm of Supply and Demand

1. Middle Eastern Dominance and Latin American Surges
The rise in stockpiles is primarily attributed to a 4.5% week-on-week jump in imports to 1.1 million metric tons in early April. Middle Eastern exporters like Iraq, UAE, and Kuwait dominated inflows, while Brazil set records by exporting unprecedented volumes to Singapore. Nigeria also ramped up shipments, with its Dangote refinery contributing 103,339 tons in April. This diversification of supply chains has created a "glut" in Asian markets.

2. Weakening Maritime Demand
Despite rising supply, demand for high-sulfur fuel oil (HSFO) has stagnated. HSFO spot differentials flipped into discounts in Asia, ending nearly a year of premiums, as weaker bunker demand—driven by slower shipping activity and trade tensions—outpaced supply absorption. Analysts note that stocks have remained above 3 million metric tons since mid-March, with inventories hitting a 13-week peak in residual fuels by late March 2025.

3. Geopolitical and Macroeconomic Pressures
The International Energy Agency (IEA) revised 2025 global oil demand growth down by 300 kb/d to 730 kb/d, citing U.S. tariffs and recession fears. Brent crude prices fell to $60/bbl—a four-year low—due to oversupply fears, while U.S. shale producers faced a breakeven threshold of $65/bbl, intensifying market volatility.

Market Implications: Oversupply, Pricing, and Strategic Risks

1. Price Suppression and Market Structure
The oversupply has capped HSFO and low-sulfur fuel oil (LSFO) premiums. By April, HSFO bunker premiums were dampened due to the stockpile buildup, while LSFO premiums showed no recovery. The market’s backwardation narrowed, signaling reduced scarcity and weaker speculative demand.

2. Storage Dynamics and Regional Shifts
Singapore’s role as Asia’s storage hub is evident: inventories averaged 21.89 million barrels monthly in late 2023, up from 18.15 million in November. However, Malaysia reduced storage movements, suggesting a strategic shift toward rerouting supplies to China, the Philippines, and Australia.

3. OPEC+ Overproduction and Global Supply Glut
OPEC+’s planned May output hike of 411 kb/d risks exacerbating oversupply, especially with overproducers like Iraq (4.32 mb/d in March) and Kazakhstan (exceeding quotas by 390 kb/d). This "non-compliance" undermines supply discipline, further pressuring prices.

Investment Considerations

Short-Term: Position for Oversupply
- Short HSFO positions: The sustained stockpile buildup and weak demand justify bearish bets on HSFO.
- Monitor Brent prices: A sustained $60/bbl floor could signal deeper macroeconomic headwinds.

Long-Term: Diversification and Storage Plays
- Invest in storage infrastructure: Singapore’s storage utilization remains high, creating opportunities for firms like Vopak or Trafigura.
- Track Middle Eastern and Nigerian exports: Their supply dynamics will dictate Asia-Pacific fuel oil flows.

Conclusion: A Market in Flux

Singapore’s 18-week stockpile rise—driven by Middle Eastern surges, weak demand, and geopolitical turmoil—paints a clear picture: the fuel oil market is oversupplied, and prices face downward pressure. With Brent at four-year lows and HSFO differentials in the red, investors must prioritize downside protection.

The data is stark: 22.9 million barrels of fuel oil in storage, persistent HSFO discounts, and a demand outlook clouded by trade wars. For energy portfolios, this means avoiding long positions in high-sulfur fuels and focusing on storage plays or diversified energy stocks. As the IEA warns, the market’s fragility is real—and the risks are global.

In this environment, agility and caution are key. The fuel oil glut isn’t just Singapore’s problem—it’s a harbinger of broader energy sector challenges ahead.