Rotterdam FOGO bunker spread widens on heating demand
13th October 2021 17:06 GMT

The spread between 0.1%S marine gasoil and 0.5%S marine fuel -- the FOGO -- has widened at Rotterdam, as demand for gasoil rises ahead of the European winter season at a time of spiraling natural gas prices, sources said.

"That is mainly because gasoil cracks [strengthened amid] expensive LNG, etc...and fuel was staying a bit behind," one bunker trader said.

The spread has averaged $113.50/mt so far in October, its highest in over two years, while spot levels reached their highest since August 2019, at $125/mt on Oct. 6, S&P Global Platts data showed. Platts Gasoil 0.1% FOB ARA barges were assessed at a 36-month high $715.25/mt on Oct. 11.

"The FOGO is widening more and more. It could also be partly due to the extreme backwardation," one bunker trader said.

On Oct. 12, the front- versus second-month ICE low sulfur gasoil futures spread was at $5.25/mt, a 24-month high. The market is in a steep backwardation until February, with the December/January and January/February spreads assessed at $5.00/mt and $4.75/mt, respectively, on Oct. 12.

Conversely, the European very low sulfur (0.5%) fuel oil market has been hit by weak fundamentals. "There is no arb and, worldwide, prices are pretty flattish," one trader said.

Bunkering demand has been relatively stable in Europe, while Singapore has seen sluggish demand recently. A weaker Singapore market would mean less room to arbitrage low sulfur fuels from Europe, leaving cargoes in Europe struggling to find homes.

Bunkerworld ,
13th October 2021 17:06 GMT