Singapore's fuel oil imports from the Middle East unlikely to rise in May on high freight rates, inventoriesMay 4
Stocks of fuel oil in the Amsterdam-Rotterdam-Antwerp hub jumped 18 % to 1.604 million mt in the seven days to Wednesday, according to data from Insights Global, reaching a fresh 22-month high as the impact of the coronavirus pandemic continues to be felt.
The Insights Global data does not provide a breakdown between fuel oil types.
The rise in stocks offset a decline the previous week, bringing stocks to levels not seen since June 28, 2018 when they were at 1.614 million mt.
Other products such as gasoline and jet have seen demand slump to a greater extent than fuel oil as a result of the coronavirus pandemic, with ship operations still ongoing as seaborne transport makes up the majority of global trade, bolstered by demand for floating storage which has been popular for clean products but less so for fuel oil.
Some dirty tanker owners West of Suez are cleaning their vessels to load clean petroleum products, as the clean tanker market booms on tightened tonnage lists and floating storage demand. However, a European source noted that if the contango on fuel oil steepens to around $20/mt the incentive for cleaning vessels will lessen.
When in-land stocks become saturated the market will need to take to floating storage, which sources have noted in the last few weeks was uneconomic.
Looking at the forward curve for VLSFO, the product is in steep contango with an emphasis on the prompt. Between the front month and month two, there is a minus $16.00/mt structure, assessed Thursday, which gives strong support to storage in the near future. The rest of the curve for 2020 and 2021 also anticipates strengthening values over time, albeit at a slower pace.
In the downstream bunkers market, intraday price volatility on the back fluctuating crude prices characterized the week. Demand for bunkering was heard to be moderate as ship operations remain resilient despite the pandemic.