In a major development, Europe’s marine high-sulphur fuel oil (HSFO) supply has tightened, with preparations for the upcoming sulphur cap well underway. As consequence prices have risen, especially in the last two weeks, reports the Argus Media.
Reason for this
- Some European refiners have reduced HSFO output by switching to lighter crude streams, and storage tanks are being cleaned to make space for fuel compliant with the International Maritime Organisation (IMO) 0.5pc sulphur cap at the expense of space for HSFO.
- Record backwardation in the HSFO barge swaps market has added to the tightness, because fuel oil barge traders are increasingly reluctant to hold large amounts of HSFO.
How is it affecting port operations?
“Dwindling production and blending of 3.5pc sulphur fuel is delaying supply for the Rotterdam bunker market and supporting cargo differentials as refiners prepare [for the cap] despite residual demand for 3.5pc product,” a bunker supplier said. The supplier expects HSFO to be tight until October, because only a limited number of fuel oil cargo suppliers are blending HSFO to bunker specifications.
Marine fuel suppliers have found it difficult to source HSFO to sell to their shipping customers.
- Last week, several suppliers in the Amsterdam-Rotterdam-Antwerp (ARA) hub ran dry and were unable to offer any product. One could only get hold of 2,000-4,000t HSFO barges, not the usual 12,000-15,000t.
- Today, barge loadings are delayed by 4-5 days. An Italian marine fuel supplier has had a hard time sourcing HSFO for Mediterranean ports, and said it is easier to find barges of 0.5pc sulphur fuel oil than 3.5pc HSFO.
- The tightness has contributed to a rise in prices. The price of high-sulphur 380cst fuel oil (HS380) — the most used marine fuel — rose by 25pc in Rotterdam and 17pc in Gibraltar between 3-13 September, compared with an Ice Brent crude price increase of 7pc.
- A further Brent price rise after last weekend’s attacks in Saudi Arabia sent HS380 prices up by a further 29pc in Rotterdam and 48pc in Gibraltar in the first two days of this week.
- Rotterdam’s marine fuel oil sales dropped by 10pc year on year in the first half of the year. By contrast, low-sulphur marine distillate sales rose — by 7pc for low-sulphur marine gasoil (MGO) and by 46pc for marine diesel oil (MDO) over the same period.
- The share of marine fuel oil in the total dropped from 84pc to 81pc, which suggests that the market is moving away from HSFO to low-sulphur supplies.
MGO Available
Unlike marine HSFO, MGO is readily available in ARA and the Mediterranean and its prices have not been under the same recent upward pressure as have those for marine HSFO. MGO can be delivered in ARA in 2-3 hours, a supplier there said. MGO prices rose by 5pc in Rotterdam and by 7pc in Gibraltar between 3-13 September, which was similar to the Brent crude price gain in this period.
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Source: Argus Media
