Australia’s heavy sweet Vincent crude cash differentials plunged due to a reduction in its flash point following the resumption of the Cimatti oilfield in the Greater Enfield project, making the crude unsuitable for low sulfur fuel oil blending, says S&P Global Commodity Insights.
Fuel oil rich Vincent crude
The fuel oil rich Vincent crude, which typically has a gravity of 19 API and a sulfur content of 0.15%, has been one of the key feedstocks for making International Maritime Organization-compliant marine fuels because of its high flash point, along with Australia’s Pyrenees and Van Gogh crudes.
Lower flash point
A lower flash point indicates higher flammability of an oil. The exact date of Cimatti oilfield’s resumption was not known.
Vincent crude’s flash point improved in the mid-2020s, making it fuel oil blender friendly. Its cash premium hit a three-year high of $13s/b against Platts Dated Brent crude, FOB for February-loading barrels amid robust blending demand, S&P Global reported earlier. But the crude’s traded level has since fallen.
Japan’s Mitsui recently sold a Vincent crude cargo to a buyer for April-loading at a premium of about $5s/b to Platts Dated Brent crude assessments, FOB, sources said. March-loading barrels of Vincent crude changed hands in the spot market at a premium of low-$13s/b Dated Brent, FOB.
“Cimatti field is back online, Vincent [is] gradually transferring into a refinery grade,” said a Singapore-based crude oil trader.
Declined production
Production from Woodside’s Ngujima-Yin floating production, storage, and offloading vessel facility, where the Vincent crude loads, fell in 2021, according to Woodside’s fourth-quarter report Jan. 20. Production declined about 14% year on year to about 7.11 million barrels as of Dec. 31, data from the report showed.
Fuel oil traders said that the current Vincent crude premium remains unviable for refineries to reap sufficient margins, despite the plunge.
“It seems China bought the [April-loading Vincent] cargo for feedstock. The price sounds high for feedstock, though. It sounds just barely profitable,” said a fuel oil trader.
Bunker pool not profitable
After crude oil crossed the $90/b mark, blending Vincent crude into the bunker pool has not been profitable, said a Singapore-based fuel oil trader. “At these crude values, no one is going to be blending crude into the marine fuel 0.5% pool, the economics simply don’t justify this.”
Another fuel oil trader said that Vincent crude’s latest premium at $5s/b to Dated Brent, FOB, is relatively high considering it’s going to be used as a refinery feedstock .”That just reflects how the market is scrambling all round for feedstock cargoes, not just on crude, but also straight-run fuel oil and vacuum gasoil,” the trader said.
Australian heavy sweet crudes
Other key Australian heavy sweet crudes, such as Van Gogh, could gain share as key feedstocks in the LSFO blending market, with Vincent crude taking a backseat.
“[Australia’s] Van Gogh or Pyrenees are now becoming the mainstream LSFO blending grade, Vincent will be more like a refinery grade later when the production is stable,” said a crude oil trader.
Van Gogh cash premium for April-loading barrels rose on the month, according to market sources. Cargoes changed hands at a premium of Dated Brent plus about mid-$14s/b-$15/b, FOB, up from low-$13s/b for March-loading barrels.
Australia’s Santos has a 350,000-barrel cargo of Van Gogh loading over May 26-30, with the May trading cycle for heavy sweet crudes likely commencing over the coming days.
There were no April-loading barrels of Pyrenees crude, according to sources, however, the May-loading cycle sentiment could remain supported amid robust LSFO product cracks.
The second month LSFO crack against Dubai swaps averaged $19.75/b in the month through March 16, surging 54% from an average of $12.83/b in February, S&P Global data showed.
Sudan/South Sudan’s heavy sweet Dar Blend, which has a typical gravity of 25 API and sulfur content of 0.11%, could also become a key fuel oil blending feedstock after Vincent’s decline, sources said.
Equity holders China National Petroleum Corp. and Malaysia’s Petronas typically export one Dar Blend cargo in sizes of 600,000 barrels up to 1 million barrels per month.
Chinese oil trader Unipec in January leased storage tanks at Singapore’s Horizon Terminal to store Dar Blend crude oil, fuel oil traders said.
Dar Blend premium could remain supported, with Senning recently selling 600,000 barrels of the crude to a trading house at a premium of about $4/b to Dated Brent, FOB, according to a crude oil trader.
March-loading barrels of Dar Blend traded in February at a premium of about mid- to high-$3s/b to Dated Brent, FOB, traders said.
Fuel oil traders in Asia could still prefer the regional heavy sweet grades over a longer voyage duration from the Marsa Bashayer export terminal in Sudan to Asia.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Platts
