European HSFO backwardation hits 21-month high
29th July 2021 14:55 GMT


The European high sulfur fuel oil market's backwardation has hit its widest in 21-months due to strong global demand, traders said. .


The spread between the front month and second month 3.5%S FOB Rotterdam barge swaps – the M1/M2 spread – was last assessed at $5.75/mt on July 28, the highest level since Oct. 31, 2019.

“We are seeing good high sulfur straight run demand globally, and demand has ticked up in West Africa and other places for high sulfur fuel oil,” said one fuel oil trader. High sulfur straight run can feed into the HSFO pool, as it can be used as both a bunkering and a heating fuel. Strength in the HSSR market is often an indicator of strength in the high sulfur fuel oil market.

Another fuel oil trader concurred, saying “The US Gulf Coast bid is still there [for HSFO]. Demand is creeping up, but also refiners are holding onto their cargoes. It’s a tight market”. The source added that refineries could be retaining high sulfur fuel oil to blend into other products.

However, the sharp increase in demand for prompt high sulfur fuel oil deliveries has not been reflected in the crack spreads. The 3.5% sulfur FOB Rotterdam fuel oil barge crack spread was last assessed at minus $11.07/b on July 28, down from minus $10.75/b the week previous.

Bunkerworld .,
29th July 2021 14:55 GMT