The recent arrival of international bunkering firms to Egypt has brought about a sharp price cut for VLSFO purchases at Suez, according to Ship & Bunker.
Minerva Bunkering received its licence to supply bunkers at Egyptian ports in both the Mediterranean and Red Sea in the middle of May, and was followed shortly afterwards by Peninsula at Mediterranean Egyptian ports in early June.
These large international firms are able to leverage their global logistics networks to source product from more cost effective locations, resulting in lower prices compared to those witnessed previously in the country.
"Of the more than 70 deliveries we have performed thus far, the significant majority have been for vessels transiting the canal and taking bunkers during the time they are already waiting for their convoy departure. Our cargo sourcing for Egypt is integrated with our existing supply chain in the Mediterranean and Saudi Red Sea, so customers can expect the same superior fuel quality", a Minerva source told Ship & Bunker.
As that lower-cost product beings to flow in to the country and compete with incumbent supply sources, it has also resulted in an unusually widened price spread. In May, Ship & Bunker reported Suez VLSFO prices at $722.50-$770.50/mt, with an average of $742/mt. This equated to a premium to Brent of $171.50/mt, or 30%. But over the past two weeks, Suez VLSFO ranged between $610.50-$720.50/mt, with an average of $676. This represented an average premium to Brent of $109/mt, or 19.2%.
On Thursday Ship & Bunker's Suez VLSFO midpoint was $42.50/mt over the price at Valetta in Malta, compared to a premium of $184.50/mt a month earlier. The premium to Gibraltar was $33.50/mt on Thursday, down from $180/mt a month earlier, while the premium to Fujairah narrowed to $10.50/mt from $164/mt a month earlier. And Suez VLSFO came in at a $36.50/mt discount to Istanbul on Thursday, compared with a $117/mt premium a month earlier.
Minerva is understood to have deployed a 150,000 DWT floating storage facility for its Egyptian operation, as well as five delivery vessels. Peninsula has yet to reveal its local delivery infrastructure.
The potential arrival of international firms had been under negotiation for more than a year with Egypt's Ministry of Petroleum and Mineral Resources having award licences to operate in the country in February 2022. Now they have finally arrived their impact may also be felt in bunker markets outside the country, with one trading source telling Ship & Bunker the discount to Istanbul's price may draw some demand away from Turkey, where the bunker market has already seen significant demand pressure.