Singapore's Fuel Oil Surge: A Bear Market for HSFO and a Bull Case for Storage

The global energy market is rarely as transparent as Singapore's ports, where tankers and terminals pulse with the lifeblood of trade. This June, Singapore's fuel oil inventories have surged to a 17-week high of 22.81 million barrels—a 19% weekly leap—painting a stark picture of oversupply that threatens high-sulphur fuel oil (HSFO) prices while creating a hidden opportunity in storage infrastructure. For investors, the data isn't just a signal—it's a roadmap for capitalizing on this imbalance.

The Oversupply Tsunami

The numbers tell a story of supply outpacing demand. By June 19, imports from Russia and the U.S. swelled net inflows to 156,093 tons, even as exports to China and the Philippines struggled. reveals a relentless climb, with stocks hitting a six-week high on June 4 and then surging further. The root cause? A geopolitical reshuffling of suppliers.

The UAE, once Singapore's top fuel oil supplier, vanished from trade routes, replaced by Brazil and South Sudan. Meanwhile, U.S. and Russian shipments filled the gap, likely driven by sanctions-driven rerouting and regional trade deals. Exports, however, faltered: fuel oil shipments dropped 40% week-on-week, even as jet fuel exports spiked. This divergence highlights a market where bunker demand—the lifeblood of Singapore's economy—is weakening. Holiday impacts and an oil spill in the region have stifled demand from ships refueling in port, leaving storage terminals to absorb the surplus.

Pricing Under Pressure

The premiums for HSFO, a critical marine fuel, have stabilized at $11–12 per ton—but stability here is a mirage. shows HSFO lagging LSFO by $10–15 per ton, a gap widening as oversupply grows. The numbers suggest a market in equilibrium only because of storage capacity, not because of strong demand.

This divergence is no accident. As low-sulphur fuels gain favor under environmental regulations, HSFO's role is shrinking. The current “stability” masks a structural oversupply, making HSFO prices vulnerable to any further demand shocks—a reality that favors short positions.

Geopolitics and the Storage Play

The geopolitical shifts in supply chains are rewriting the rules. Russia and the U.S. are now key players in Singapore's fuel trade, a sign of how sanctions and trade wars are rerouting energy flows. For investors, the key takeaway is this: the oversupply isn't temporary.

This creates a paradox: as HSFO prices weaken, storage infrastructure becomes a strategic asset.

Companies with terminals or storage capacity—like Keppel Infrastructure Trust or those in the regional logistics sector—are positioned to profit as inventories rise.

The Investment Thesis

1. Short HSFO: The fundamentals are bearish. With inventories at 17-week highs and demand constrained by weak bunkering activity, HSFO prices are likely to remain depressed. Shorting HSFO futures or holding inverse ETFs tied to energy prices could capitalize on this trend.
2. Storage Infrastructure: Look to companies with physical assets. will likely outperform as storage utilization rates climb. The need to hold excess supply could push rental rates higher, boosting earnings.

Risks and Considerations

• Demand Recovery: If bunkering demand rebounds sharply—post-oil spill or due to economic growth—HSFO prices could stabilize.
• Policy Shifts: New environmental regulations or geopolitical developments could disrupt supply chains again.

Conclusion

Singapore's surging inventories are a mirror of today's energy market: oversupplied, geopolitically reshaped, and ripe for strategic bets. HSFO's plight is clear, but the storage boom is a hidden gem. Investors who recognize this imbalance—and act swiftly—will find value in the dark corners of the trade terminals.

The market is sending a signal. Will you listen?