Tight VLSFO supply to ease as refineries in Med increase production
5th July 2022 14:53 GMT

Marine fuel 0.5%S markets saw tight supply across Europe in the past weeks as refiners have been using sweeter crude lately to maximize production of products like gasoline.

Tightness on very low sulfur fuel was further exacerbated by expanded regional turnaround and strong gasoline cracks.

Recently Israeli Bazan Group’s Haifa refinery was producing 0.5%S marine fuel again, softening the tightness on the supply side. “The Med looks like it is better supplied on the 0.5% side at the moment”, said one fuel oil trader on July 5.

Meanwhile, Petroineos’s Lavera refinery was back from maintenance and also producing 0.5%S marine fuel, according to sources. Planned maintenance at France’s Lavera started maintenance May 8, which was set to last around two months, S&P Global Commodity Insights reported earlier.

Next to an increase in VLSFO supply in the Med, the availability of LSSR as a blending component for marine fuel has also contributed to the recent softening of supply tightness on 0.5%S marine fuel.

Low sulfur straight run is a common blending component to produce the IMO-2020 compliant 0.5%S marine fuel oil. LSSR can alternatively also be used to produce products like gasoline via secondary refinery units. Therefore, LSSR fundamentals can have an impact on the VLSFO market. LSSR barrels from Algeria's Skikda refinery were heading to Singapore, sources said, because blending components for VLSFO remained tight in Asia.

Gasoline cracks have recently also softened, giving some support for the VLSFO market. The Platts Gasoline Eurobob 10ppm FOB ARA barge brent crack was last assessed at $36.95/bbl July 4, down $9.55/bbl on the week.

Meanwhile, the Asian marine fuel 0.5%S market is unlikely to weaken in July despite a drop in Singapore 10 ppm gasoil crack spread, traders said. As gasoil values remain higher than marine fuel 0.5%S, cutter stocks are taken by the gasoil market, the traders added. An inflow of arbitrage cargoes from the West in July is not increasing significantly, market sources said.

Singapore is expected to receive 1.5 million-2 million mt of low sulfur fuel oil from the West in July, compared with 1.6 million-1.9 million mt in June, fuel oil traders said.

Bunkerworld ,
5th July 2022 14:53 GMT