In the absence of spot, physical trade and of firmly established 0.5pc sulphur bunker specifications by the International Organization for Standardization (ISO), US traders and refiners’ views diverge on the composition and therefore the price of 0.5pc sulphur residual bunkers says a news article in Argus.
Pegging of HFO price
Launched in mid-November, Argus‘ 0.5pc sulphur resid prices for New York and the US Gulf reflect daily input from bunker and residual fuel oil cargo sellers. Traders have been pegging 0.5pc sulphur heavy bunker fuel prices between the price of 0.5pc sulphur VGO and low-sulphur straight-run fuel oil (SRFO).
Some traders believe that in 2020, prices of VGO and SRFO will be high enough that they will be less attractive as refinery feedstock and could be sold directly into the bunkering market. Some US-based traders are looking to support imports of these products from Algeria, Nigeria, the Russian Baltic Sea and the Russian Black Sea closer to 2020.
Testing of blends
Refiners on the other hand were testing blends of residual fuel oil and ultra-low sulphur diesel (ULSD) with 0.0015pc sulphur content, in an effort to find home for their high-sulphur fuel oil output. But currently the resid-gasoil blend prices are less attractive compared with outright VGO and SRFO values.
In the US Gulf, a hypothetical blend of 3.5pc sulphur residual fuel oil and ULSD in 1:6 ratio ranged at $71.50-73.20/bl compared with Argus-assessed 0.5pc sulphur residual fuel oil which was priced at $66.25-69.50/bl in the first week of November. In New York, a hypothetical blend of 1pc sulphur residual fuel oil and ULSD in 1:1 ratio ranged in price at $68.35-70.78/bl compared with Argus-assessed 0.5pc sulphur residual fuel oil assessment which was priced at $67.50-69.80/bl.
Assessment
Argus assessments for the first week of November, showed the 0.5pc – 3.5pc sulphur resid premium in the US Gulf ranging at $11.30-11.80/bl (about 73-76/t); and the 0.5pc – 3pc sulphur resid premium in New York ranging at $10.80-11.39/bl (about $69.50-73.50/t).
Return On Investment
Industry forecasts have called for spreads to widen in the fourth quarter of 2019, and peak in the first half of 2020. Price spreads projections are tracked by shipping companies investing in scrubbers.
According to shipowner Genco Shipping & Trading, assuming the price spread between high-low sulphur fuel oil is at $200/t, a vessel with over 150,000t deadweight could see a scrubber return on investment in about 1.1 years. For smaller vessels the return on investment at $200/t spread could vary from 2.4-4.9 years.
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Source: Argus
