Singapore's fuel oil imports from the Middle East unlikely to rise in May on high freight rates, inventoriesMay 4
European HSFO cracks have bucked expectations, finding support in the wake of IMO 2020 on non-bunker and anticipated scrubber demand.
There were just five 3.5%S FOB Rotterdam barge offers in the June 22 Platts Market on Close process – three from Gunvor and two from Mercuria – while there were 26 bids across the 5-15 days forward delivery window.
Likewise, June 23 saw six offers split equally between Gunvor and Litasco, while there were 13 bids, seven of which were traded.
In the run up to IMO 2020 -- which saw the sulfur cap in marine fuel cut to 0.5% from 3.5% -- refineries adjusted their focus on 0.5%S marine fuel, and limited production of 3.5%S material. HSFO can now only be used on the high seas with the use of scrubbers.
“Scrubbers are working and people learned to use HSFO,” said one trader.
With this tighter availability, the 3.5%S FOB Rotterdam barge crack has found strength, trading around minus $5.68/mt on the Intercontinental Exchange, it's strongest in around 11 months. This is well-up from a recent low of minus $33.431/b November 29.
Because offers were heard thin, a source said that product was heading to other destinations such as the US and the Red Sea.
“There are limited amount of Russian cargoes heading for Rotterdam,” a second source said, adding that more M100 was heading for the US.
According to the vessel tracking software Kpler, the amount of HSFO that flowed into the ARA region from the Baltic Sea was down 560,000 barrels on the year to May, at just 6.34 million barrels. Still, this was up more than 4 million barrels from the just over 2 million barrels in April.
In comparison, the amount of HSFO heading from Europe (including the Baltic Sea) to the US jumped to 9.5 million barrels in May, from 2.18 million barrels in April, according to Kpler on June 23. This was a fourfold increase from the 2.34 million barrels making the same voyage in May 2019.
The US has been importing increasing amounts of HSFO and high sulfur straight run for use as a coker feed, however feasibility looking forward has been questioned due to the product's crack strength.
Russian fuel oil output had declined due to refinery maintenance and run cuts in April and May, but European demand was dented by the coronavirus outbreak and travel restrictions. Russian fuel oil output totaled 3.090 million mt in May, down 21% on year, and 4.1% on month.