Image above: Low-sulphur fuel oil premium to high-sulphur $/t
Global energy and commodity price reporting agency Argus Media on Tuesday (21 May) provided a marine fuels market related update:
Low-sulphur fuel oil (LSFO) cargo swaps in northwest Europe yesterday traded at their widest premium to high-sulphur fuel oil (HSFO) barge swaps since July 2014. Values were close to recent 0.5pc sulphur trade levels, potentially signalling a pricing shift ahead of the implementation of the sulphur cap on shipping emissions.
LSFO front month cargo swaps — with a 1pc maximum sulphur content — traded at $435/t at 16:30 BST (15:30 GMT) yesterday, a $35.50/t premium to high-sulphur barges. In comparison, shipping company Euronav bid around a $30-40/t premium to HSFO Rotterdam barges to secure 0.5pc fuel oil for floating storage off Malta, market participants told Argus.
LSFO cargo swaps prices typically move in line with HSFO swap owing to lower demand for the former, since only power plants in European islands such as Cyprus and Malta burn 1pc fuel oil.
But both prices recently started diverging, likely because of changing market fundamentals ahead of the implementation of the International Maritime Organisation's (IMO) sulphur cap on 1 January 2020. And the wider premium recorded this week, could signal low-sulphur fuel oil (LSFO) cargo swaps include a higher proportion of product with a lower sulphur content, as market participants transitions to very low sulphur fuel in preparation for the IMO cap.
Under the new IMO regulation, vessels must limit sulphur emissions in exhaust fumes to 0.5pc, down from a current maximum of 3.5pc. Shipowners will either have to burn new 0.5pc sulphur fuel oil blends, use marine gasoil (MGO) or run LNG to comply. They can also fit ships with exhaust scrubbers to continue to burn high-sulphur fuel oil.
Euronav started storing IMO compliant fuels and blending products in its 443,000t ultra large crude carrier (ULCC) Oceania off Malta, as part of its strategy for the sulphur cap. The company already purchased at least five 30,000t cargoes of very low sulphur fuel.
The Argus calculated assessment of 0.5pc Rotterdam barges reached 590.50/t yesterday.
Meanwhile, a well-supplied high-sulphur market owing to rising Russian Baltic exports weighed on Rotterdam barges prices and also contributed to widen the HSFO discount to LSFO.
High-sulphur fuel oil cracks against Ice July Brent hovered around their weakest levels since October recently, reaching a discount of $10.11/bl yesterday, on weaker demand for exports to the Asia-Pacific region.
Sulphur content of marine fuels will drop to 0.5pc globally in 2020, from 3.5pc today.
Photo credit: Argus Media
Published: 24 May, 2019
Delayed exhaust gas scrubber installations will further boost demand for IMO-compliant products.
A signal to the industry that port state control will enforce new sulphur limits from ‘day one’.
‘We need to pay close attention and maintain our focus on compliance as we move toward a stable path.’
The price levels for VLSFO and LS MGO have risen respectively by 30% and 24% from start of December.
LSVGO is part of the blending pool that can be used as a component for the blending of IMO 2020 fuels.
DGST will issue a new circular detailing IMO 2020 implementation plans, superseding previous circular.
Webinar will offer delegates insights on the prevention of operational issues when using VLSFOs, along with an update on biofuels and bunker fuel quality trends for 2021 and its forecast for the current year.
Heating VLSFOs to prevent cold flow issues causes issues related to distillate ageing, and there is a gentle balance to be maintained when handling the product.
Research into n-paraffin distribution of VLSFOs has shown that they not only differ from MGO, but significantly differ from each other as well, states bulletin.
Bunker Holding and Dan-Bunkering have decided not to appeal the city court ruling in the case where the companies were on trial for breaching EU sanctions against Syria, states USTC.
Poll shows market participants think Singapore’s future as a bunkering hub in the near term will be impacted most by growth in alternative bunker fuels and intensifying competition from other ports in Asia.
‘We will now take the necessary time to consider and evaluate the verdict and the premises of the verdict thoroughly before making any decision of whether to appeal to a higher court,’ informs company.
