HSFO values in Europe for 2020 have been nipping at the heels of those seen in 2019, bucking expectations of them plunging following the implementation of the International Maritime Organization's sulfur cap at the start of the year.

The spread between physical prices for 3.5%S FOB Rotterdam barges in 2019 and 2020 reached as close as $4/mt year on year on Sept. 1, assessed at $257/mt, before the spread widened again.

In the paper market, 3.5% FOB Rotterdam barge front months in 2020 were above the previous year’s values for five trading sessions from Aug. 31 to Sept. 4. On Sept. 3, the spread between the yearly values saw 2020 pricing peak at $19/mt above values for 2019, assessed at $237.25/mt this year.

HSFO prices had been expected to weaken sharply following the bunker market's move to very low sulfur fuel oil of 0.5% sulfur content, but values have remained resilient on tighter availability alongside newer demand streams.

This resilience has been reflected in the crack levels for HSFO, which are notably higher for 2020 – assessed at minus $6.34/b Sept. 3, in comparison to minus $22.48/b the year before. In the S&P Global Platts latest assessment, cracks for 2020 were assessed $14.88/b higher than the year before at minus $6.13/b Sept. 7.

While values for both physical and paper have now since fallen to below 2019 levels, it is still beating previous expectations.

As IMO 2020 approached last year, refineries looked to shy away from HSFO production to put emphasis on VLSFO, the now complaint fuel oil choice.

This, alongside changing trade flows has lessened availability of product in Northwest Europe.

“[HSFO] availability being tighter is also a function of the market being smaller,” one source said, highlighting the product is being pulled "in all directions."

HSFO accounted for 25% of bunker sales at the Northwest Europe hub at Rotterdam in the first half of the year, data from Rotterdam port authority and S&P Global Platts Analytics showed, demonstrating the strong local demand the product commands.

“HSFO is tight,” one source said situated in the Mediterranean, adding “ bunker demand is good.”

HSFO has also seen a strong pull west to the US Gulf Coast as coker feed, as sources noted exports from the Baltic are bypassing Europe and heading trans-Atlantic.

A staggering 6.92 million barrels of HSFO headed west to the US during the month of August from the Baltic Sea, according to data intelligence company Kpler, a fourfold increase on August 2019's 1.33 million barrels.

Meanwhile, the Netherlands has seen a drop of 64% month on month of Baltic HSFO exports, with 2.6 million barrels seen in August compared with 7.19 million for the same month last year.

“I do not think there is a lot of prompt oil,” one source said, noting that a lot of the product was termed up.