Fuel oil stocks in European OECD countries fell 1.7 million barrels month on month in September, compared with a total European products’ decline of 4.1 million barrels, the International Energy Agency said Nov. 12 in its monthly report.

Stocks of European fuel oil have become tighter as reduced refinery runs in Europe constrain availability, while demand for marine transport has not been as severely impacted by lockdowns in the region as other transport fuels.

That pressure on refining may remain in place. “Lockdowns, particularly in Europe, have been re-instituted, mobility has been retrenching, and transportation related oil demand is at risk,” S&P Global Platts Analytics said.

The fuel oil outlook remained clouded, as dwindling supply relies on better demand from other parts of the barrel, namely diesel, gasoline and jet fuel, for refineries to see incentive to increase runs.

One source said supply largely drives the market at present, adding “refineries are trying to refrain from producing light ends”.

"We are seeing that among all products, fuel oil demand is the most resilient,” one trader said.

Backwardation continued to grip the fuel oil forward curve. S&P Global Platts assessed the 3.5% FOB Rotterdam fuel oil barge balance-of-month/front-month and front-month/second-month spreads at minus $3/mt and $1/mt, respectively, on Nov. 11.

Blending components were also scarce in the region, making it difficult for players to blend their product down to on-specification fuel oil grades.

Preliminary October data for Europe showed total product stocks building by 500,000 barrels and fuel oil inventories falling by 800,000 barrels, the IEA said.