Fuel oil volumes traded in the Platts Market on Close assessment process for 3.5% FOB Rotterdam barges declined 25% month on month in September, reports S&P Global Platts.
This comes at the juncture as the market gears up for the switch to 0.5% sulfur marine fuels at the start of January.
Drop in 3.5% RMG fuel
Some 412,000 mt of 3.5% RMG 380 CST fuel oil traded in the Platts MOC in September, below the year-to-date monthly average of about 471,000 mt, and well below August’s 546,000 mt and July’s 594,000 mt.
BP, Shell and Mercuria were the main buyers, while Litasco, Vitol and Gunvor sold the majority of the barge clips.
IMO 2020 around the corner
Refiners and bunker suppliers around the world are preparing for the International Maritime Organization’s incoming 0.5% sulfur cap limit on marine fuel from January 1 by introducing low sulfur bunker fuels.
From the start of next year, vessels will no longer be able to use 3.5% sulfur fuel oil unless they have an exhaust gas cleaning system fitted.
Shutting down HSFO inventories
Bunker hubs such as Singapore have made reducing HSFO inventories a primary focus. Companies are looking to store low-sulfur components on VLCCs off the coast of Singapore for the 0.5% blending pool.
The hi-lo spread, measuring the 1% FOB NWE cargoes premium to 3.5% FOB Rotterdam barges, showed a contango structure along the forward curve for the remainder of the year, supported by increased storage incentive.
LSFO – Need of the hour
Low sulfur fuel oil has become an attractive blend stock for the production of 0.5%S marine bunker fuel.
About 7 million mt of components are being stored in 20-25 VLCCs, sources said.
Singapore to meet up with demand
In addition, Singapore has 1 million-2 million mt of LSFO components interminals, according to sources.
Singapore’s bunker demand is about 4 million mt/month. The LSFO components in storage are considered sufficient to cover similar demand until the end of the first quarter of 2020.
Some European refineries have already switched to producing low sulfur fuels in an attempt to steer away from HSFO ahead of the sulfur cap regulation, sources said.
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Source: S&P Global Platts
