Europe & Africa Market Update 18 March 2024

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Regional bunker benchmarks have mostly tracked Brent’s upward movement, and bunker supply is normal in Rotterdam, reports Engine.

VLSFO

Changes on the day, from Friday to 09.00 GMT today:

  • VLSFO prices up in Gibraltar ($8/mt) and Rotterdam ($6/mt), and down in Durban ($5/mt)
  • LSMGO prices up in Durban ($27/mt), Rotterdam ($10/mt) and Gibraltar ($8/mt)
  • HSFO prices up in Gibraltar ($7/mt) and Rotterdam ($5/mt)

Durban’s VLSFO price has moved counter to the wider market direction, resisting Brent’s upward pull. A lower-priced VLSFO stem booked for non-prompt delivery in Durban for $788/mt has contributed to drag the benchmark lower. VLSFO availability has improved in the South African ports of Durban and Richards Bay in the past two weeks. Lead times of 7-10 days are advised for VLSFO deliveries in both ports. However, strong wind gusts of 20 knots are forecast in Durban on Thursday, which could complicate deliveries there. 

VLSFO prices in Rotterdam and Gibraltar have increased over the weekend, tracking Brent’s upward movement. A steeper rise in Gibraltar’s VLSFO price has widened its premium over Rotterdam by $2/mt. Bunker fuel availability is said to be normal in Rotterdam and in the wider ARA hub. The region’s independently held fuel oil stocks have averaged 10% higher so far this month, compared to February, according to Insights Global data. 

Bunkering is progressing normally in Gibraltar today, but strong wind gusts of 30-32 knots are forecast to hit the port on Thursday and Friday. This could disrupt smooth bunker deliveries there. Slight congestion has been reported in Ceuta today. 8 vessels are due to arrive for bunkers in Ceuta today, up from four on Friday, according to port agent Jose Salama & Co.

Brent

The front-month ICE Brent contract moved $1.12/bbl up on the day from Friday, to trade at $85.85/bbl at 09.00 GMT.

Upward pressure:

The upward momentum in Brent futures was driven by mounting geopolitical tensions in both Eastern Europe and the Middle East.

Ukraine launched multiple drone attacks across Russia over the weekend, which led to a fire incident at the Slavyansk refinery in Krasnodar, as confirmed by the Russian defense ministry. The refinery, which processes 8.5 million mt of crude oil annually (equivalent to 170,000 b/d), faced disruption, Reuters reported. While the drones were neutralized, one caused a fire upon landing, according to the Krasnodar region’s operational headquarters’ official Telegram channel.

Initial estimates suggest that around 15% of Russia’s refining capacity suffered disruption after the recent drone attack, potentially leading to a short-term decline in crude oil exports as authorities work to mitigate the impacts, SPI Asset Management’s managing partner Stephen Innes noted.

Meanwhile, in the Middle East, Israeli Prime Minister Benjamin Netanyahu reiterated the country’s commitment towards the ongoing military operations in the Gaza Strip until a complete removal of the Hamas militants’ group is achieved. Netanyahu’s recent statement has extinguished hopes about the warring parties reaching a ceasefire deal, thereby reigniting concerns about supply disruptions in the oil market.

These events intensified upward pressure on oil prices, highlighting the market’s susceptibility to geopolitical tensions and supply interruptions, Innes commented.

Downward pressure:

Brent futures faced downward pressure due to the strengthening of the US dollar last week, which experienced its most rapid growth in eight weeks following a 0.6% increase in the country’s producer price index (PPI) in February.

A higher PPI reading could prompt the US Federal Reserve (Fed) to postpone its interest rate reduction plans for the year, potentially dampening demand growth in the world’s largest crude oil consuming nation.

Oil investors will closely monitor the outcome of the US Fed’s two-day meeting, which commences today, according to IG Bank’s analyst Tony Sycamore. He emphasized that the recent high Consumer Price Index (CPI) and Producer Price Index (PPI) data will be key considerations for Fed members during this week’s Federal Open Market Committee (FOMC) meeting.

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Source: Engine