London — Refinery run cuts continued to impact the European fuel oil market in the week started Nov. 15 while news of a coronavirus vaccine sparked a backwardated structure despite unchanged fundamentals.
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** Rotterdam Marine Fuel 0.5%S FOB barges finished the week to be assessed at $310.50/mt on Nov. 13, up 5.61% from the previous week.
** Backwardation in the FOB Rotterdam 0.5%S marine fuel barge structure steepened amid news of a COVID-19 vaccine on Nov. 9.
"There is a huge backwardation because people think that the vaccine will bring miracles soon," one market source said. "But I don't see [that] fundamentals changed that much." Sources added that fuel oil cracks will continue to show resilience well into the first quarter of 2021.
** The crack spread for 0.5% sulfur marine fuel is currently the strongest performing of all transport products. The front-month 0.5%S FOB Rotterdam crack was last assessed Nov. 13 at $5.669/b. The second strongest crack is front-month LS gasoil, assessed Nov. 13 at $3.630/b. Both a far cry from front-month gasoline Eurobob 10 ppm, which was assessed Nov. 13 at 55 cents/b.
"0.5%S marine fuel supply is not that abundant," one source said, adding that this was on the back of refinery capacity being underutilized.
** Combined inland inventories of very low and high sulfur fuel oil in the Amsterdam-Rotterdam-Antwerp hub edged lower on the week to Nov. 11 at 1.345 million mt, Insights Global data showed.
That followed a 1.5% decrease the previous week to 1.351 million mt. The Insights Global data does not provide a breakdown of fuel oil types.
** Refinery run cuts heard in the barge market were trickling downstream to the bunkers market in Northwest Europe. There were some loading delays cited for very low sulfur fuel oil and high sulfur fuel oil at Antwerp but this was heard easing toward the end of last week.
** In Greece, both HSFO and VLSFO were tight in Piraeus on the back of limited supply coming from nearby refineries, a buyer said in the week ended Nov. 14.
High sulfur fuel oil
** Rotterdam 3.5%S fuel oil barges on an FOB basis finished the week to be assessed at $249.25/mt on Nov. 13, up 6.63% from the previous week.
** Likewise, the front-month 3.5%S FOB Rotterdam crack has found support on limited availability, last assessed Nov. 13 at minus $4.292/b, up from minus $5.913/b seen Oct. 13.
** Additionally, HSFO was tight at Rotterdam, a supplier said on Nov. 13. HSFO remained marginally limited at Augusta on the back of limited availability in the upstream market. "Demand is high respective to the supply," one bunker source said, noting difficulty sourcing in the upstream market.
** South Africa continued to see tight availability of HSFO in the week ended Nov. 14, a bunker buyer said, adding that it "looks to continue for a while ahead." Not all suppliers were offering on the spot market, a market source said in the week ended Nov. 14.
** Fuel oil product volumes were seen heading East amid decent arbitrage opportunities and ongoing demand from Sauda Arabia and Singapore. The Aframax, St Helen, was on subjects to load about 80,000 mt of fuel oil from the ARA hub mid-November, destined for discharge in Singapore at a lump sum of $1.75 million, according to shipping sources. In addition, the Aframax, Ionic Astrapi, loaded about 80,000 mt of fuel oil from Rotterdam port on Nov. 11, destined for discharge in the Red Sea at a lump sum of $1.05 million for Aramco Trading Co., according to shipping sources.
Feedstocks
** Vacuum gasoil was seeing "significantly more supply than demand," one source said, amid poor refinery economics from second wave of COVID-19 lockdowns that has impacted transport fuel demand in the region.
"There are pockets of demand," another source said, noting that any demand is sporadic and not consistent.
Likewise, low sulfur straight-run has been hit demand-wise on continued lockdowns, with it typically being processed in secondary units.
However, LSSR could find its way into the 0.5%S marine fuel blending pool, fuel oil sources said.
"In this scenario, blending components' availability will increase and the 0.5% marine fuel market will relax," one fuel oil trader said. "It is hard to forecast precisely, but lockdowns push the market in that direction."
One feedstock source said LSSR was normally too good a product to enter the 0.5%S marine fuel blending unless someone had a "cheap, nasty" component to blend with.
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